Discount To Net Asset Value
A pricing situation that occurs with a closed-end mutual fund when its market price is currently lower than the net asset value of its components. Discounts can occur in times where the market has a pessimistic future outlook and fund investors have started to sell their holdings.
Also known as "discount to NAV". Investopedia Says:
This phenomenon only occurs in closed-end funds. Open-end funds, on the other hand, are not as affected by supply and demand because they are bought and sold at prevailing net asset values.
While a discount NAV could be an indication that the underlying assets in a fund will dip in value, it could also be a temporary market over-reaction. Moreover, the fund manager may decide to buy back shares of the fund to remove the discount and restore the fund's value back to its net asset value Related Terms:
Closed Fund
Mutual Fund
Net Asset Value - NAV
Net Asset Value Per Share - NAVPS
Open-End Fund |