Funds & wrappers
Premium and discount
The gap between a listed fund’s share price and the value of the assets it holds.
How it works
Closed-ended funds have a fixed number of shares, so the price is set by supply and demand and can sit above or below NAV for long periods.
Persistent discounts are common in less fashionable sectors. Buying at a discount adds return if it narrows and costs nothing if it does not, but it can also widen.
Where it misleads people
A wide discount is not automatically a bargain. It often reflects genuine doubts about the stated valuations, the fees, or the ability ever to realise the assets.
Related terms
- Investment trustA listed company whose business is holding investments, with a fixed number of shares.
- Net asset valueThe value of everything a fund owns, minus what it owes, divided by the number of units.
- ETFA fund whose shares trade on an exchange throughout the day like an ordinary share.
- Liquidity riskThe risk of not being able to sell when you want to, without accepting a bad price.
More in Funds & wrappers
- Private equity
- Portfolio turnover
- Synthetic ETF
- Performance fee
- Target-date fund
- Transaction costs
- Mutual fund
- Active management
All 25 Funds & wrappers terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.