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.
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