Investor Education

What are premiums and discounts?

What are premiums and discounts?

With a closed ended product, such as a Listed Investment Trust, the number of units or shares is fixed and investors have to trade amongst themselves. Because of this, THEY actually set the share price of each unit or share based on supply and demand. The more investors that want to buy a particular share or unit in a closed ended product, the higher the price and vice versa when more investors want to sell, the lower the price. If the share price is compared to the Net Asset Value, investors can then determine if the product is trading at a premium or a discount. If the share price is higher than the Net Asset Value, then the unit or shares are trading at a premium and conversely, if the share price is lower than the Net Asset Value, the unit or share is trading at a discount.

The unique thing about open ended products, such as Active ETFs, is that premiums and discounts are minimal due to the fact that supply is NOT limited because investors can buying and selling from the fund. This means that the share price typically trades very close to the Net Asset Value of the fund, generally within 1 to 2 cents.

For all of Magellan’s listed funds, we disclose the Net Asset Value every 15 seconds on our website using in intraday indicative NAV, which is called on iNAV, which investors can use to compare to the share price of each listed fund.

Important Information: This material has been delivered to you to provide information regarding Magellan Asset Management Limited (‘Magellan’) and has been prepared for general information purposes and must not be construed as investment advice. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer or invitation to purchase, sell or subscribe for in interests in any type of investment product or service. No distribution of this material will be made in any jurisdiction where such distribution is not authorised or is unlawful. This material does not take into account your investment objectives, financial situation or particular needs. You should read and consider any relevant offer documentation applicable to any investment product or service and consider obtaining professional investment advice tailored to your specific circumstances before making any investment decision. This material and the information contained within it may not be reproduced or disclosed, in whole or in part, without the prior written consent of Magellan.

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