Why would a fund trade at a discount to NAV?
A fund trading at a discount to NAV offers an opportunity to profit. A discount signals that investors, maybe wrongly or rightly, find the securities in the fund to be valued below their comprehensive NAV value.
Why does a close end fund have a discount?
Closed-end funds issue a fixed number of shares. Unlike other fund structures which can issue and redeem shares, this means that supply will not necessarily meet demand. For many funds the number of shares exceeds demand, and so the fund trades at a discount.
Do closed-end funds trade at discount to NAV?
One of the appealing attributes of closed-end funds (CEFs) is the potential to buy shares at a discount to their net asset value (NAV). CEFs frequently trade at discounts.
Why might a closed-end fund be priced at a premium or discount to NAV?
There are many reasons that influence whether a closed-end fund trades at a discount or premium. It could be something fundamental, such as the underlying asset class of that fund falling in and out of favor with the market. Or it could be the up and down fluctuation in supply and demand for the stock.
Why do some investment trusts trade at a discount?
Some trusts do persistently trade on a discount. In many cases this is down to a lack of investor appetite for its shares and a lack of share buybacks being made by its board. Low demand for an investment trust’s shares could be down to its performance not standing out from the crowd.
What does it mean when a trust is trading at a discount?
Unlike open-ended funds, investment trust shares can trade below the value of their investments. This is known as a discount and basically means the shares are cheap. Investment trust share prices can also trade above the value of their assets. This is known as a premium and means the shares are expensive.
What does it mean if a fund is trading at a discount?
Discount to net asset value (NAV) refers to a situation where shares of a closed-end stock fund are trading at a price lower than the fund’s net asset value per share.
What is the NAV of CEF?
Overview
| Share Price | NAV | |
|---|---|---|
| Current | $17.65 | $18.50 |
| 52 Wk Avg | $18.30 | $18.84 |
| 52 Wk High | $20.44 | $20.85 |
| 52 Wk Low | $16.75 | $17.40 |
Why can closed-end funds sell at prices that differ from net value?
Why can closed-end funds sell at prices that differ from net value while open-end funds do not? Close-end funds trade on the open market and are thus subject to market pricing.
Why do some closed-end mutual funds trade above or below their net asset values?
The fundamentals of supply and demand will adjust the trading price of a mutual fund compared to its NAV. If the fund is in high demand and low supply, the market price will typically exceed the NAV. If there is low demand and much supply, the market price will usually be lower than the NAV.
Which investment trusts are trading at a discount?
Top 10 investment trusts for bargain hunters
| Investment trust (and ticker) | Premium (start of 2022) | Discount (current) |
|---|---|---|
| RTW Venture (RTW) | 4.1 | -7.6 |
| Baillie Gifford US Growth (USA) | 0.8 | -7.5 |
| JPMorgan US Smaller Companies (JUSC) | 1.1 | -6.2 |
| Baillie Gifford Japan (BGFD) | 1.9 | -4.5 |
What does trading at a discount mean?
In the field of investing, “at a discount” refers explicitly to stock that is sold for less than its nominal or par value. The nominal, or par, value for a security, which is detailed in the company charter, is the minimum price that a stock of a particular class can be sold for in an initial public offering (IPO).