Indicative net asset value (iNAV) is a measure of the intraday net asset value (NAV) of an investment. Reported approximately every 15 seconds, it gives investors a real-time perspective of the investment’s value throughout the day.
Key Takeaways
- Real-time Insights: Indicative net asset value (iNAV) offers a near real-time evaluation of an investment’s net asset value, updated roughly every 15 seconds.
- Widely Applicable: The iNAV can be used for both closed-end mutual funds and exchange-traded funds (ETFs).
- Accurate Valuation: The calculation agent uses updated prices of portfolio securities to provide an accurate asset value, subtracts liabilities, and divides by the number of shares to determine the iNAV.
Understanding Indicative Net Asset Value (iNAV)
The iNAV is typically reported by the exchange where the investment is traded. It uses the same methodology as a fund’s accounting NAV. The calculation agent employs the latest prices for all securities in the portfolio to generate the total asset value. By subtracting liabilities and dividing by the number of shares, the iNAV is established.
Calculation agents have access to comprehensive fund data, which allows them to update the iNAV every 15 seconds during market hours. Sometimes, iNAVs are also given their own ticker symbols for easier tracking and monitoring.
Indicative Net Asset Value (iNAV) vs. Net Asset Value (NAV)
The iNAV functions as a crucial tool to help funds maintain trading near their net asset value. With updates occurring every 15 seconds, iNAV offers an almost instantaneous view of a fund’s value, aiding in preventing substantial premium and discount trading.
Closed-end funds and ETFs calculate their NAV due to their legal status as mutual fund investments under the Investment Company Act of 1940. Although these funds trade like stocks at market prices, they also produce a daily NAV due to SEC requirements.
The accounting NAV is calculated at the end of each trading day, whereas the iNAV provides real-time adjustments based on intraday market movements, offering investors more dynamic insights.
Special Considerations
Premiums and Discounts
Due to their nature of trading on an exchange, closed-end funds and ETFs often exhibit premiums or discounts relative to their NAV. The iNAV serves as a tool to help keep the trading values closer to their accounting values, though variations can still occur.
Premiums might arise when investors are optimistic about a fund’s underlying holdings or management outlook. Discounts generally happen when investors are bearish or skeptical of the fund’s management. Supply and demand dynamics, along with the timing of financial market reporting, can also influence the fund’s trading price.
Related Terms: Net Asset Value, Exchange-Traded Funds, Closed-End Funds, Securities, Calculation Agent.
