Fund Terminology

 

Net Asset Value (NAV)

The NAV is a determination of the market value of a fund.

It is calculated by subtracting the total liabilities of the fund (fees, costs etc.) from the total assets of the fund.

 

Net Asset Value (NAV) = fund Assets − fund Liabilities

 

NAV Unit Price

Money that is invested into a fund, Units are allocated representing the investors proportionate share of the fund. The price or value of these Units can move up or down, depending on the performance or change in value of the assets held by the fund.

The price of each Unit is based on the fund’s Net Asset Value (NAV) divided by the number of Units issued in the fund.

 

NAV Unit Price = Net Asset Value (NAV) ÷ Total number of Units

 

You can calculate the value of your investment, before any transaction cost, by multiplying the number of units you hold by the NAV Unit Price.

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Value of your investment = Number of Units you hold × NAV Unit Price

 

For example; if you have 10,000 Units and the NAV Unit Price is $1.10, the value of your investment is $11,000*.

e.g. 10,000 × $1.10 = $11,000*

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* Figures used are for illustration only

 

Entry (Application) and Exit (Withdrawal or Redemption) Prices

When applying for more units in a fund the price that will be used to process your application would be the Entry or Application Price.

When you submit a request to withdraw all or part of your investment in the fund the price that will be used to process your withdrawal request would be the Exit or Redemption Price.

 

Generally, the difference between the Entry Price and Exit Price and the NAV Price is known as a Buy/ Sell Spread.

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Buy/Sell Spread

A Buy/Sell Spread is used to protect investors from the costs generated by the transaction activity of other investors in a fund, a Buy/ Sell Spread is included in the Entry or Application or Exit or Withdrawal Price of the fund.

A fund may charge a Buy Spread of 0.05% and a Sell Spread of 0.05%, the Entry and the Exit Price are made 0.05% higher and 0.05% lower respectively from the NAV Unit Price.

The Buy / Sell Spread is an adjustment to take account of certain transactional costs, such as brokerage and custody settlement, which the fund must pay to both invest new money and to realise investments to pay investors leaving the fund. 

 

Entry Price (Application Price)

If you want to buy Units in the fund, the actual price you pay for each Unit is called the Entry Price.

The Entry Price is calculated by taking the NAV Unit Price and adding the Buy/Sell Spread value.

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NAV Unit Price + (NAV Unit Price x Buy Spread) = Entry Price

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For example: if a Unit has a NAV Unit Price of $1.1000 and the Buy/Sell Spread for a fund is +/-0.05%, the Entry Price is $1.10055*.

$1.1000 + (1.10000x 0.05%), = $1.10055*

 

* Figures used are for illustration only

 

Exit Price (Withdrawal Price or Redemption Price)

If you want to sell Units, the actual price you will receive for each Unit is called the Exit Price.

The Exit Price is calculated by taking the NAV Unit Price and subtracting the Buy/Sell Spread value.

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NAV Unit Price -  (NAV Unit Price x Sell Spread) = Exit Price

 

For example: if a Unit has a NAV Unit Price of $1.1000 and the Buy/Sell Spread for a fund is +/-0.05%, the Exit Price is $1.09945*.

$1.1000 – (1.1000 x 0.05%), = $1.09945*

 

* Figures used are for illustration only