When we first approached the fund , we did not understand many of the appropriate terms in the fund. In the fund investment market, we often hear the terms “fund valuation” and ” fund net worth . But do you know what they mean? What’s the difference between the two?
- Net worth and valuation
The net value of the fund refers to the net value of the fund units, that is, the net asset value of each fund unit, which is equal to the balance of the total assets of the fund minus the total liabilities, divided by the total number of units issued by the fund.
Fund valuation refers to the process of calculating and evaluating the value of fund assets and liabilities according to fair prices, and determining the net asset value of the fund and the net value of the fund unit. Generally, fund valuation is used to predict the net worth of the fund. However, the fund valuation does not equal the actual net worth of the fund.
Second, the difference
There are three differences between fund valuation and fund NAV:
(1) The essence of the two is different:
- The essence of fund valuation: Fund valuation refers to the process of calculating and evaluating the value of fund assets and liabilities based on public allowable prices to determine the value of fund assets and fund shares.
- The essence of the net value of the fund: the net value of a fund unit refers to the current total net assets of the fund divided by the total fund shares.
(2) The calculation methods of the two are different:
- Calculation method of fund valuation: Consistency of valuation methods means that the Fund adopts the same valuation method, and the asset valuation follows the same valuation rules. The publicity of the valuation method means that the valuation method employed by the fund needs to be publicly disclosed in the offering documents required by law. If the fund changes its valuation method, it also needs to be disclosed in a timely manner.
- Calculation method of fund NAV:
(1) Calculation of known prices: Known prices, also known as historical prices, refer to the closing price of the previous trading day. The known price calculation method is that the fund manager calculates the total value of the financial assets owned by the fund according to the closing price of the previous trading day, including stocks, bonds, futures contracts, warrants, etc. , plus cash assets.
The NAV per fund unit divided by the total number of fund units sold. Using the known price calculation method, investors can timely understand the transaction price of the unit fund on that day and go through the delivery procedures.
(2) Calculation of unknown price: unknown price, also known as futures price, refers to the closing price of various financial assets in the securities market on that day, that is, the fund manager calculates the net asset value of fund shares based on the closing price on that day. When this calculation method is implemented, investors do not know what the price of the fund they are buying or selling is on that day, and the price of a unit of the fund does not know until the next day.
(3) The nature of the two is different:
- The nature of fund valuation: The net value of fund shares is the basis for calculating the amount of subscription and redemption of open-end funds , which is directly related to the interests of fund investors. This requires that the calculation of the net value of fund shares must be accurate.
In light of recent market changes and issues related to fair value recognition and measurement in the process of implementing new accounting standards by fund management companies , the China Securities Regulatory Commission has further regulated fund valuation business, especially the valuation of long-term suspended stocks and other non-marketable investment products , and formulated the “Guiding Opinions on Further Regulating the Valuation Business of Securities Investment Funds “.
- The nature of the net worth of the fund: Looking at various funds around the world, due to different management systems, the specific regulations on the valuation date of the fund’s net worth are also different. However, as a general rule, the fund manager must calculate and publish the net asset value of the fund at least once every working day or at least once a week or a month.