NAV per Share: Fund Value Behind Each Share

Key Takeaways

• NAV per share equals (Total Assets minus Total Liabilities) divided by shares outstanding, computed at the close.
• The SEC requires open-end mutual funds and UITs to calculate NAV at least once per business day.
• Closed-end fund market prices regularly trade at premiums or discounts to NAV per share, sometimes 10% or more.
• For REITs, NAV per share uses estimated market value of real estate, not historical cost on the balance sheet.

What It Is

Net asset value per share is the per-share equity of a fund or investment vehicle after marking assets to market and deducting liabilities. The SEC defines NAV as the company's total assets minus its total liabilities, and the per-share figure divides by shares outstanding at the close of trading.

For open-end mutual funds, NAV per share is also the price. Investors buy and redeem shares at NAV plus any applicable sales loads or redemption fees. For closed-end funds and ETFs, NAV per share is calculated daily but the trading price is set by market supply and demand and can deviate.

The Intuition

A fund is a portfolio of securities. The value of a share in the fund should equal the share of the underlying portfolio that share represents. NAV per share captures that relationship directly.

For real estate trusts, the same logic applies but with property appraisals instead of mark-to-market security prices. NAV per share answers the question: if the REIT sold every building at appraised value, paid off its debt, and distributed the residual, what would each share receive?

How It Works

The general formula is:

NAV per Share = (Total Assets - Total Liabilities) / Shares Outstanding

For mutual funds and ETFs, total assets are the market value of portfolio holdings plus accrued income and cash. Liabilities include accrued expenses, management fees, and any borrowings. The Investment Company Act of 1940 requires registered funds to calculate NAV in a manner consistent with their stated valuation procedures.

For REITs and operating real estate funds, the calculation requires an additional step. Properties on the balance sheet are usually carried at depreciated historical cost under US GAAP, not market value. NAV analysts replace those carrying values with estimated market values, typically using capitalization rates applied to net operating income, then subtract debt and other liabilities.

Closed-end funds calculate NAV per share daily but the market price can diverge. The discount or premium to NAV is the difference between price and NAV expressed as a percentage of NAV. Persistent discounts of 5% to 15% are common in many closed-end fund categories.

Worked Example

A diversified equity mutual fund holds $5.2 billion of stocks, $200 million of cash, and accrues $50 million of dividends receivable. Liabilities total $30 million. Shares outstanding are 110 million.

NAV per Share = (5,200 + 200 + 50 - 30) / 110 = 5,420 / 110 = $49.27

All investor purchases and redemptions on that trading day settle at $49.27 per share, plus any sales charges. The next day, if portfolio values rise 1% and shares outstanding rise to 110.5 million, the new NAV per share is approximately $49.71.

A US apartment REIT carries $12 billion of buildings on its balance sheet at historical cost net of depreciation. An NAV analyst estimates the buildings are worth $18 billion at current cap rates. Debt is $6 billion, other liabilities $200 million, and shares outstanding 250 million.

NAV per Share = (18,000 - 6,000 - 200) / 250 = 11,800 / 250 = $47.20

If the REIT trades at $42, it is at a 11% discount to NAV per share. If it trades at $52, it is at a 10% premium.

Common Mistakes

1. Confusing NAV with book value. For mutual funds, NAV is marked to market and equals economic equity. For operating companies, book value can lag market reality by years.
2. Trading closed-end funds at NAV. Closed-end fund prices are not redeemable at NAV. They can persistently trade at material discounts or premiums.
3. Using GAAP book value as REIT NAV. REIT GAAP equity uses historical-cost depreciation. NAV requires market-value cap-rate appraisal of the properties.
4. Forgetting accrued expenses. Management fees and other accrued liabilities reduce fund NAV. Omitting them inflates the per-share figure.
5. Mixing currencies. International funds report NAV in their base currency. Cross-currency comparisons must use spot FX consistently.

Frequently Asked Questions

What is NAV per share in simple terms? It is the fund's assets minus liabilities, divided by the number of shares. For a mutual fund, it is the price at which you buy and sell.

How does NAV per share affect investment decisions? For mutual funds and ETFs, NAV is the transaction price and the right valuation anchor. For closed-end funds and REITs, comparing market price to NAV per share signals whether the stock trades at a discount or premium to underlying value.

What is a real-world example of NAV per share? Large US mutual funds often have NAV per share between $10 and $100. Closed-end municipal bond funds have historically traded at discounts of 5% to 15% to NAV per share over long periods.

How can investors use NAV per share effectively? For funds, monitor the discount or premium to NAV over time. Buying a quality closed-end fund at a wider-than-usual discount has been a recognized contrarian strategy. For REITs, compare price to estimated NAV per share alongside FFO multiples.

How is NAV per share different from book value per share? NAV uses current market value of assets. Book value uses historical-cost accounting. For an open-end mutual fund the two coincide; for an operating REIT they often differ materially.

Sources

1. SEC, Investor.gov. Net Asset Value. https://www.investor.gov/introduction-investing/investing-basics/glossary/net-asset-value
2. CFA Institute. Market-Based Valuation: Price and Enterprise Value Multiples. https://www.cfainstitute.org/insights/professional-learning/refresher-readings/2026/market-based-valuation-price-enterprise-value-multiples
3. Damodaran, A. Chapter 16: Estimating Equity Value Per Share. NYU Stern. https://pages.stern.nyu.edu/~adamodar/pdfiles/valn2ed/ch16.pdf
4. SEC. Investment Company Act of 1940. https://www.sec.gov/about/laws/ica40.pdf

Disclaimer

This article is educational content only and is not financial advice. Nothing here is a recommendation to buy, sell, or hold any security. Consult a licensed advisor before making investment decisions.