NAV Discounts and Premiums · Investment Trusts

Two NAV figures can differ without either being a mistake. Income treatment, debt valuation, share count and timing must match before a discount comparison is meaningful.

Read the valuation label

A company may report NAV with income included or excluded, and may present debt using par value or fair value. Diluted figures may reflect potential additional shares under specified assumptions. Each label answers a different measurement question.

Suppose one service displays NAV of 250p including accrued income while another shows 246p excluding it. Against a 225p price, the discounts are 10% and about 8.54%. The difference is methodological rather than necessarily a disagreement about the holdings.

Understand debt measurement

A fixed borrowing obligation can have a market value different from its repayment amount. Interest rate changes can affect that fair value. Deducting one or the other from assets changes the reported NAV even when the underlying investments are unchanged.

Do not choose the NAV basis that makes the discount look largest. Use the company’s explanations and keep a consistent series for comparisons. Check whether a transaction or tender specifies a particular basis.

Allow for timing and capital changes

A price taken after a dividend entitlement changes should not casually be compared with a NAV calculated before the same event. Share issuance, repurchases and conversion can also alter the denominator.

Build a data checklist: timestamp, income basis, debt basis, diluted or undiluted, currency and share class. If an input is unavailable, describe the comparison as provisional rather than presenting false precision.

Try it yourself

Price is 180p. One NAV basis is 200p and another is 195p. Calculate both discounts.

Show the worked answer

The first discount is 10%. The second is 15 divided by 195, or about 7.69%. The basis must be stated with the result.

Further reading

Educational material, not a recommendation to buy or sell a fund. Numerical examples are hypothetical. This guide focuses on listed investment companies commonly called investment trusts in the UK. Product terms, access and tax treatment vary by jurisdiction.

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