Demystify Net Asset Value - see how equities, bank fixed deposits, accrued dividends, and management fees determine daily unit prices.
Net Asset Value (NAV) is the intrinsic value of one unit of a mutual fund. It is calculated by summing up the current market value of all underlying shares, bonds, debentures, and cash deposits held in the fund's portfolio, subtracting all operational liabilities and statutory fees, and dividing the resulting net figure by the total number of outstanding fund units.
Investors often treat mutual fund NAV like a stock price, mistakenly thinking a fund with an NAV of NPR 10 is "cheap" while one with an NAV of NPR 18 is "expensive." In reality, NAV reflects underlying portfolio performance. Understanding how NAV is calculated protects you from buying overvalued speculative funds and helps you identify genuine undervaluation on NEPSE.
Every trading day at 3:00 PM, fund accountants value all listed shares using NEPSE's official closing market prices. If NEPSE rallies, the equity asset portion expands immediately.
Add capital invested in Class A commercial bank fixed deposits (earning 7%-9%), corporate debentures, call money balances, and declared but unpaid stock dividends.
Subtract daily accrued statutory expenses: AMC management fee (max 1.5% p.a.), depository fee (0.2%), supervisor fee (0.15%), SEBON regulatory levy, and audit provisions.
Take Total Assets minus Total Liabilities, and divide by total issued units to determine the official NAV per unit down to two decimal places.
| Portfolio Asset / Liability Item | Accounting Valuation Method | Balance Sheet Value | Contribution per Unit |
|---|---|---|---|
| Listed NEPSE Shares | Closing market price on NEPSE | NPR 72,50,00,000 | NPR 7.25 |
| Bank Fixed Deposits (Class A) | Principal + accrued interest | NPR 18,00,00,000 | NPR 1.80 |
| Corporate Debentures | Amortized cost / clean price | NPR 8,50,00,000 | NPR 0.85 |
| Cash, Call Accounts & Dividends | Liquid bank balance & receivables | NPR 3,20,00,000 | NPR 0.32 |
| Total Assets (A) | Sum of all investments & cash | NPR 1,02,20,00,000 | NPR 10.22 |
| Accrued Fees & Liabilities (B) | AMC, Depository, Audit provisions | NPR 1,80,00,000 | NPR 0.18 |
| Net Asset Value (A - B) | Net Portfolio Value (10 Cr units) | NPR 1,00,40,00,000 | NPR 10.04 Per Unit |
Under SEBON Mutual Fund Regulations 2067, fund managers in Nepal are required to keep between 60% and 80% of assets in listed securities, while maintaining safe allocations in bank fixed deposits and risk-free government securities. Furthermore, fund management fees are strictly capped: maximum 1.5% for fund management, 0.2% for depository services, and 0.15% for independent fund supervisors (typically respected civil society members or chartered accountants). This fee cap ensures that AMC overhead does not erode retail investor gains.
Prakash noticed that Scheme A had an NAV of NPR 10.20, while Scheme B had an NAV of NPR 15.60. A friend advised him: "Buy Scheme A, it is near par value (NPR 10) so it has more room to grow double."
Prakash examined the portfolio disclosure reports. Scheme A was near NPR 10 because it had suffered heavy losses in speculative hydro stocks. Scheme B was at NPR 15.60 because it held top-tier commercial banks and lucrative debentures compounding steadily for 4 years. He invested in Scheme B, which grew another 14% that year, while Scheme A dropped below par.
Goal & Dilemma: Evaluating which open-ended mutual fund offers superior fundamental performance.
Market value of equities + fixed deposits + bonds + cash + receivables.
Accrued management fees, custodian charges, audit provisions.
Total units held by all investors.
Total Assets = NPR 1,25,00,00,000. Total Liabilities = NPR 2,50,00,000. Outstanding Units = 10,00,00,000 (10 Crore units). Net Assets = NPR 1,22,50,00,000. NAV = 1,22,50,00,000 / 10,00,00,000 = NPR 12.25 per unit.
Treating a NPR 10 NAV fund as "cheap" and an NPR 18 NAV fund as "expensive".
NAV is not a stock price; evaluate portfolio asset quality and historical performance instead.
Believing that declared mutual fund dividends are "free money" on top of NAV.
When a fund pays an NPR 1 dividend, the NAV automatically drops by exactly NPR 1 on the book closure date.
Ignoring monthly portfolio disclosure reports published by merchant banks.
Review top 10 stock holdings, sector diversification, and fixed deposit allocations monthly.
Under SEBON directives, open-ended mutual funds update and publish NAV daily on their websites. Close-ended funds calculate NAV weekly and publish a comprehensive audited monthly report by the end of each Nepali month.
Yes. If the NEPSE index enters a severe bear market and stock prices plummet, the fund's equity assets lose value, driving NAV below NPR 10 (e.g., NPR 8.50 or NPR 9.20).
On the respective merchant bank websites (e.g., niblcapital.com, siddharthacapital.com), financial portals (Sharesansar, Merolagani), and SEBON's official portal.
When a fund distributes cash dividends, cash physically leaves the fund's bank account to unit-holders. Under SEBON accounting rules, the total asset value drops, immediately reducing the post-dividend NAV.
Under SEBON regulations, open-ended funds must calculate and publish their NAV daily on their websites, while closed-ended funds must publish weekly NAVs and audited monthly performance reports.