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Section: 2 Market Value of Net Asset
While all investment companies pool the assets of individual investors, they also need to divide claims to those assets among those investors. Investors buy shares in investment companies, and ownership is proportional to the number of shares purchased. The value of each share is called the Net Asset Value or NAV.
Market Value of Net Asset = Market Value of Assets - Liabilities
Consider a mutual fund that manages a portfolio of securities worth SR 120 million. Suppose the fund owes SR 4 million to its investment advisors and owes another SR 1 million for rent, wages due and miscellaneous expenses. The fund has 5 million shareholders. Hence,
Market Value of Net Asset = SR 120 million – SR 5 million
5 million Shares
Market Value of Net Asset = SR 23 per share