NAV-igating Value: How Interval Fund Share Price is Calculated

An interval fund’s net asset value is a great indicator of its performance. But who actually calculates the number, and how?

DEFINING NAV

A fund’s “net asset value” (NAV) can refer to two different numbers. Technically, the term denotes a fund’s “net assets” – the sum of its assets minus the sum of its liabilities. However, “net asset value” and “NAV” are almost always used to refer to the fund’s “net asset value per share” – its net assets divided by the number of shares issued. This number, calculated once a day, is the price at which interval fund shares are bought and sold.

Here, as with most other resources, “NAV” means “net asset value per share.” It’s a confusing but essential distinction.

CALCULATING NAV

A fund’s NAV is calculated by a third-party pricing agent, which must have up-to-date information about each of the securities held by the fund, as well as key details about the fund itself. This process, called “striking” the NAV, occurs at the end of each business day (usually around 4:00 PM Eastern Standard Time). If the fund has significant holdings in different time zones, which is typical in emerging-market funds, the timing of the striking process may change. The NAV that the pricing agent calculates is used as the cost of a share of the fund for the next day’s trading.

The pricing agent calculates a fund’s NAV in three steps:

1. Determine which securities, such as stocks and bonds, the fund holds – and how many of each.

2. Retrieve the current dollar value of each of those securities and multiply that by the quantity the fund holds.

3. Add together each of those values, then divide it by the number of shares the fund has issued to investors.

PRICING AGENTS

Because calculating NAV requires a vast amount of real-time data and accounting resources, the service is performed by qualified third-party pricing agents. Bloomberg’s Evaluated Pricing service, BVAL, is a popular option. Intercontinental Exchange, Inc (ICE) and Refinitiv also have widely used securities pricing services. Information about which agent or service a fund uses can usually be found in its prospectus in the section describing the fund’s accounting.