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What is the difference between the cumulative NAV of the fund and the NAV per unit? Why is the cumulative NAV lower than the NAV per unit?

2022-01-24

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Many friends will see that the fund has unit net worth and cumulative net worth when buying a fund, and then choose a fund based on this indicator. In fact, there is a difference between cumulative net worth and unit net worth. This article will give you a detailed introduction to the difference between cumulative net worth and unit net worth, and why the cumulative net worth is lower than the unit net worth.

The difference between cumulative net worth and unit net worth

The unit net value of the fund refers to the net value of each fund unit, which is equal to the balance of the total assets of the fund minus the total liabilities and divided by the total number of fund units. Simply put, the NAV per unit is the value of each fund and the transaction price of the fund.

The cumulative net value of the fund is based on the net value of the unit plus the accumulated dividends and splits since the establishment of the fund. Therefore, once the fund distributes dividends or splits, the cumulative net value will be greater than the unit net value. The cumulative net worth is the data reflecting the overall income of the fund since its establishment. The cumulative net worth of the fund should be referred to when evaluating the performance of the fund.

Generally speaking, the greater the difference between the unit net worth and the accumulated net worth, the greater the amount of dividends distributed by the fund. However, the number or amount of dividends distributed by a fund is not a criterion for judging the performance of a fund. Here are the specific differences:

1. Different definitions: The net value of a fund unit is the value of each share of the fund on that day, and the cumulative net value refers to the fund that reflects the cumulative income since the establishment of the fund.

2. Different reflections: The net value of a unit reflects the equity of the fund holder at a certain point in time, and the accumulated net value reflects the historical performance of the fund during the operation period.

3. The calculation is different:

Unit Net Value = (Total Fund Assets - Fund Liabilities)/Total Fund Units.

Cumulative net worth = net worth of fund units + cumulative amount of dividends per unit in the history of the fund (total amount of all dividends paid out in the history of the fund/total shares of the fund).

Why is the cumulative net worth lower than the unit net worth?

The calculation formula of unit net worth is: unit net worth = (total assets-total liabilities)/total fund shares, which reflects the current value of the fund and the expected return of the unit; the calculation formula of cumulative net worth is: cumulative net worth of the fund = net worth of units + since the establishment of the fund The sum of accumulated dividends, reflecting the data of all expected returns of the fund since its inception.

Usually the net value of a fund's unit is lower than its accumulated net value, but there are some special circumstances that cause the unit's net value to be higher than the accumulated unit's net value.

1. The cumulative net value caused by the conversion of on-site ETF products is lower than the unit net value. For example, South China Securities 500ETF implemented share conversion on April 14, 2015, and each fund share was converted into 0.28032483, resulting in a cumulative net value far lower than the unit net value.

2. The closed-end fund or open-end fund has been transformed, and the performance after the transformation is not good, resulting in the cumulative net value being lower than the unit net value.

Now everyone should know the difference between cumulative net worth and unit net worth. You can do more before buying funds. Only when you have enough knowledge and understanding of the fund can you take advantage of the opportunity in actual investment, so that the income will naturally be more stable.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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What is the difference between the cumulative NAV of the fund and the NAV per unit? Why is the cumulative NAV lower than the NAV per unit?

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