NAV Return

What Is NAV Return?

The NAV return is the change in the net asset value of a mutual fund or ETF over a given time period. The NAV return of a mutual fund is one measure of return and can be different than the total return or the market return that investors realize because these products can trade at a premium or discount in the market to the fund's computed NAV.

Understanding NAV Return

The NAV return is calculated based on the daily NAV of the fund reported after the stock market's close each trading day. The NAV is a basic calculation performed by the fund's accountants. It represents the total assets minus total liabilities divided by outstanding shares. The value changes daily with the fluctuation of assets based on market value. The NAV return is a transparent accounting measure that reports the actual assets in the fund at the end of the day. Therefore, dividends, interest, and capital gains distributions paid out to shareholders would not be included in the total assets unless they were reinvested.

The total return of a mutual fund provides a performance figure that includes distribution payouts. Therefore, it accounts for distributions associated with the fund that are paid out to shareholders regardless of whether or not these distributions are reinvested in the total assets of the fund. Distribution payouts are the primary reason an investor will see variations in NAV versus total return.

Investment funds that trade on exchanges with daily pricing, such as closed-end funds and exchange-traded funds, may also have a market price and a market return. Funds trading in real time with a market price can incur a market premium or discount that causes their market return to vary from the NAV return. Funds trading above their NAV are said to trade at a premium. Funds trading below their NAV are trading at a discount. Premiums and discounts may occur due to the real-time valuations of securities in the fund versus their daily NAV. Funds typically trade close to their NAV with some deviation. If a fund varies excessively from its NAV, then authorized participants may intervene to help correct the price.

NAV Return and Fund Performance Reporting

Investment companies provide transparency in their fund performance reporting to help investors identify the NAV return, total return, and market return. Investors should monitor the returns they use to track the performance of their investments. Ensuring understanding of fund performance calculations will help an investor's due diligence and performance comparisons. 

Most closed-end funds and ETFs will provide performance reporting that includes both the NAV return and the market value return. The Guggenheim Strategic Opportunities Fund provides one example of a closed-end fund. The Fund's investments are based on both quantitative and qualitative analysis. Investments span across asset classes including fixed income, equity, and preferred stock. As of July 1, 2021, the Fund was reporting a 26.69% premium to NAV. It's closing NAV on July 1 was $17.16 versus a closing market value price of $21.74. The Fund also has a 52-week average premium of 16.56%.