Home | SEC role | Sitemap | Contact Us
Valuation

            Net Asset Value (NAV) represents the total value of assets that a fund has invested in at any specific period of time. The calculation of NAV is based on the mark to market (MTM) method which reflects the current market value of the funds' assets. For example, when a provident fund invests in common stocks listed in a stock market, the stocks’ closing price will be used to calculate the fund’s NAV. As a result, the fund’s value will change to reflect the market. Besides, provident funds in Thailand have now utilized the unitization system. Under this system, it would be easier for members to monitor funds' performance as their values are unitized into units.
  • What is "Mark to Market"?
            "M to M" refers to accounting for the market value of assets or liabilities such as stocks, debentures and government bonds, etc. For example, If a fund wants to invest in Stock A traded in a stock market, the fund will have to buy it at the market price. If two months later the fund wants to sell the Stock A, it will also have to sell it at the market price. However, the price may increase, decrease, or remain stable when compared to the cost of obtaining the Stock A. 

            The followings are examples of market prices used to assess the market value of funds:
  • Stocks are assessed by the closing prices in the Stock Exchange of Thailand.
  • Bonds/Debentures are assessed by using the latest yields traded in Thai Bond Market Association.
  • Mutual Fund Units are assessed by the net asset values (NAV) per unit at the end of the day.
  • Deposits/Promissory Notes are assessed by using the sum of principal and accrued interests.

  • Why do we use "Mark to Market"?

              1. To promote fairness in asset and benefit distribution of funds to all members
                  
                   Example : Net asset value per unit equals to 10 baht

                   Situation 1 : If the market price of the bond held by a fund is higher than its cost, there will be an increase in the fund's asset value per unit e.g. 11 baht. If the fund uses the 10 baht cost as a base in calculating benefits for its existing members, new members and resigned members, the results are...


Existing Members

New Members

Resigned Members

 

 

 

Lose

Gain

Lose

Calculated benefits are less than the actual ones.

New members gain because they join the fund with the lower price.

Resigned members get only 10 baht instead of 11 baht.


                  Situation 2 : If the market price of the bond held by a fund is lower than its cost, there will be a decrease in the fund's asset value per unit e.g. 9 baht. If the fund uses the 10 baht cost as a base in calculating benefits for its existing members, new members and resigned members, the results are...

Existing Members

New Members

Resigned Members

 

 

 

Gain

Lose

Gain

Calculated benefits for existing members are more than the actual ones.

New members lose because they join the fund with the higher price.

Resigned members get only more than what they should



If all the assets of the fund are marked to market, there will be no advantage or disadvantage to anyone.

              2. To reflect the real performance of funds and the management companies

                   Members will immediately know whether  funds are effectively managed or not. The information obtained can assist members in deciding on which fund to invest or which asset management company to chose.

                   Furthermore, M to M technique is regarded as an international standard. Most of the countries that have established pension funds or provident funds apply the technique to calculate their funds' value since it is considered fair to every member. Examples of those countries are Hong Kong, Singapore, Japan, India, Australia, England and OECD member countries.

                  Using M to M technique also adheres to the Thai Accounting Standard (TAS) No. 42. The TAS is an auditing and accounting guide stating that a fund’s assets managed by an investment company must be marked to market.

                  At this moment, fund committees and members should have a better understanding of what "Mark to Market" is as well as realize the necessity of using this technique in assessing the fund value so as to be fair to every member.
  • What is unitization?
             Formerly, a fund’s net asset value was measured by its total value in baht. However, the number shown hardly provided any indicator of the fund performance. To further develop the provident fund industry and provide more benefits to members, the office of the Securities and Exchange Commission (SEC) has initiated and enforced the principle of “unitization” in 2001. A provident fund must record and report each member of his/her net asset value in terms of number of units and unit value. At the introduction stage upon which the fund’s unit value has not yet been specified, the value may be initially set at 10 baht per unit. Moreover, at least one trade date per week must be set so as to continually update the fund’s unit value.

              Example:
              Monthly Contribution = 10,000.00 baht
              Unit Value = 10.25 baht
              Number of units allocated to member account = 975.61 units

  • Why shall NAV calculation be verified  by a NAV Verifier?
              Since NAV is crucial in calculating provident funds' units for employees who make contribution to the fund and in calculating the benefits paid to resigned and terminated members, the NAV calculation made by a management company under the mark to market concept as specified by Association of Investment Management Companies shall be verified by an NAV Verifier in order to approve its correctness and to ensure whether the calculation is in compliance with the rules. Moreover, NAV is also used for the calculation of the composite return which would represent a management company’s real performance.







last updated date 24/05/2553

Copyright @ 2008 Securities and Exchange Commission. All rights reserved. Best view on Internet Explorer 5.0+ and desktop resolution 1152x864
Disclaimer : This website is set up with the purpose of providing news and information to general public and shall not constitute advice made by the Securities and Exchange Commission. The risk of use of information is assumed by the user. As information contained in this website may from time to time be changed, we nevertheless intend to make it at all time correct and up-to-date. In case you find any incorrect information in this website, please inform us at thaipvd@sec.or.th