Premiums and discounts to NAV

The premium/discount is (market price ÷ NAV − 1) × 100. A negative number is a discount, a positive number a premium. A fund priced at $9 with a $10 NAV is at −10%, which we also write as a 10% discount.

Why discounts exist

Researchers have proposed many explanations and none is complete: expenses and management fees reduce what shareholders will pay for the assets; distributions that exceed portfolio earnings can push prices above NAV (premiums) among income-seeking investors; illiquid holdings, leverage and sentiment all play a role. What is well documented is that discounts are persistent and mean-reverting only slowly.

What a discount does and does not tell you

Buying at a discount means you are paying less than the current value of the assets and receiving the fund's distributions on a larger asset base than you paid for. It does not mean the discount will close. Discounts can widen further, and a fund's average discount over years can be far from zero. That is why this site shows the current figure next to its own history — the 1-, 3- and 5-year averages and the Z-score — rather than in isolation.

Some corporate actions do force price and NAV together: tender offers at or near NAV, liquidations, conversions to open-end structure, and term dates. These are tracked under Corporate Actions, with the caveat that terms, extensions and conditions are set out in the official documents and can change.