NAV Computation
Units Outstanding
Learning Outcome
5
Analyze the impact of income, expenses, and unit changes.
4
Calculate NAV using net assets and units outstanding.
3
Compare open-ended and closed-ended funds.
2
Understand its impact on NAV calculation.
1
Define Units Outstanding and its role in mutual funds.
What are Units Outstanding?
Units Outstanding are the total mutual fund units currently held by investors and not yet redeemed.
Simple Analogy
A mutual fund is like a pizza, and each slice represents a unit.
Units outstanding are the total slices held by investors.
The pizza represents the fund's total assets.
NAV is the value of each slice.
NAV = Fund Assets ÷ Units Outstanding.
Worked Example
A mutual fund has:
-
Total Assets: ₹50 crore
-
Liabilities (Expenses accrued): ₹2 crore
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Units Outstanding: 2 crore units
Income Accruals
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Interest Income Accrual: ₹1.5 crore (from bonds)
-
Dividend Income Accrual: ₹0.8 crore (from equity holdings)
Total Income Accrued = ₹2.3 crore
Expense Accruals
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Management Fees: ₹0.5 crore
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Custodian & Trustee Fees: ₹0.1 crore
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Other Operating Expenses: ₹0.1 crore
Total Expenses Accrued = ₹0.7 crore
Solution:
Net Assets Calculation:
Net Assets = Total Assets + Income Accrued - Expenses Accrued
Net Assets = 50 + 2.3 - 0.7 = ₹51.6 crore
NAV per unit:
NAV per unit = Net Assets ÷ Units Outstanding
= 51.6 ÷ 2
= ₹25.8 crore
Summary
5
NAV = Net Assets ÷ Units Outstanding.
4
Income increases net assets; expenses reduce them.
3
Open-ended funds have changing units.
2
They are used to calculate NAV.
1
Units Outstanding are the total units held by investors.
Quiz
What do Units Outstanding represent in a mutual fund?
A. Total assets of the fund
B. Total liabilities of the fund
C. Total units currently held by investors
D. Total income earned by the fund
Quiz-Answer
What do Units Outstanding represent in a mutual fund?
A. Total assets of the fund
B. Total liabilities of the fund
C. Total units currently held by investors
D. Total income earned by the fund
