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Explain Net Asset Value, Close-ended scheme and Asset Management Company.

Explain Net Asset Value, Close-ended scheme and Asset Management Company.


1 Answer

Net Asset Value:

Net Asset Value (NAV) is the value of an entity’s assets less the value of its liabilities, often in relation to open-end or mutual funds, since shares of such funds registered with the U.S. Securities and Exchange Commission are redeemed at their net asset value. This may also be the same as the book value or the equity value of a business. Net asset value may represent the value of the total equity, or it may be divided by the number of shares outstanding held by investors and, thereby, represent the net asset value per share. Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per, unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. Thus, NAV of a mutual fund unit is nothing but the book value.

Close-ended scheme:

Close-ended mutual fund Schemes have a stipulated maturity period wherein the investor can invest directly in the scheme at the time of the initial issue and thereafter units of the scheme can be bought or sold on the stock exchanges where the scheme is listed.


Asset Management Company:

An Asset Management Company (AMC) is an investment management firm that invests the pooled funds of retail investors in securities in line with the stated investment objectives. For a fee, the investment company provides more diversification, liquidity, and professional management consulting service than is normally available to individual investors. The diversification of portfolio is done by investing in such securities which are inversely correlated to each other. They collect money from investors by way of floating various mutual fund schemes. In general, an investment company is a company that is engaged primarily in the business of investing in and managing a portfolio of securities.

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February 12, 2019