The valuation of underlying assets of an ETF determine its NAV...
30-Apr-2013 •Research Desk
Why are the NAVs of different Gold ETFs different?
- P R Dilip
There are three probable reasons for different net asset value (NAV) of various Gold exchange traded funds (ETF). Firstly, there is a difference in the underlying gold denomination. In all gold ETFs one unit of gold represents one gram of gold except for Quantum mutual fund where one unit is equivalent to half gram of gold. Therefore, the NAV of this fund is around half the NAV of other Gold ETFs.
The other reason is a gold ETF invests in gold but may also have some allocation to debt and cash or cash equivalents for liquidity purpose. For example, as per its March 2013 portfolio, ICICI Prudential Regular Gold Savings had a 3.28 per cent allocation to debt.
The NAV of gold ETFs is determined by combining the value of underlying assets (gold, cash, debt), and dividing it by the number of units.
And finally, ETFs deduct expenses on a daily basis from the fund. Therefore, the difference in expenses will lead to a difference in the NAV. Higher the expense lower will be the NAV and vice-versa.
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