Net Asset Value (NAV)

Net asset value is the core output of fund accounting. It is calculated at each valuation point by pricing every position, adding cash, receivables and accrued income, and subtracting liabilities such as payables, accrued management fees, accrued performance fees and expenses. Dividing total NAV by shares or units outstanding gives NAV per share, the price at which investors subscribe and redeem in an open-ended fund.

Operationally, NAV is only as reliable as the inputs behind it. A NAV cycle depends on complete trade capture, clean reconciliation of cash and positions, an agreed pricing hierarchy, correct accruals and accurate share-class and investor-level allocations. The fund administrator typically produces the official NAV; many managers run shadow accounting to check it independently before sign-off.

Common pitfalls include stale or unapproved prices, missed corporate actions, fee accruals calculated on the wrong base, and late trades booked after the cut-off. Because a NAV error can affect every investor who transacted at the wrong price, most funds maintain a NAV error policy that defines materiality thresholds and when investors must be compensated.

Example

A fund holds investments valued at $104.5M, cash of $0.7M and accrued interest of $0.2M, for total assets of $105.4M. Liabilities (accrued fees, payables) total $0.9M. NAV = $105.4M − $0.9M = $104.5M. With 1,000,000 shares outstanding, NAV per share = $104.50.