Investment Trust Foundations · Investment Trusts

NAV measures the assets attributable to a share. The share price is what buyers and sellers agree to pay. Their movements can diverge, changing the result a shareholder experiences.

Calculate the portfolio measure

Net asset value is assets minus liabilities. Divide the relevant net assets by the applicable share count to calculate NAV per share. Complex capital structures require more care, so use the company’s definition rather than a shortcut that ignores other claims.

For a simple company with £96 million in net assets and 40 million ordinary shares, NAV is £2.40 per share. If the exchange price is £2.16, 1,000 shares cost £2,160 before costs, even though their stated share of net assets is £2,400.

Understand the two moving parts

The portfolio can change because investments rise or fall, income accrues, liabilities change or costs are paid. The market price can also respond to investor demand, liquidity and expectations about those assets. A reported NAV is a valuation, not a standing cash offer to shareholders.

A buyer of the hypothetical shares cannot assume that £2,400 can be withdrawn from the company. Selling ordinarily means accepting an available market price. A separate tender or liquidation follows its own terms and costs.

Check the observation before calculating

Record the time and date of both figures, their currency, share class and valuation basis. Comparing today’s market price with an old private asset NAV can create a precise looking but uncertain discount.

Keep price and NAV in separate columns. This habit prevents a common mistake in later performance work: attributing every move in the share price to the manager’s underlying investments.

Try it yourself

Net assets rise from £96 million to £100 million with 40 million shares unchanged. What is the new NAV per share?

Show the worked answer

NAV becomes £2.50 per share. The exchange price still depends on trading and need not increase by the same percentage.

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.

Continue learning