The intraday net asset value (iNAV) of an ETF is an indicative value of its underlying basket based on the last available market prices of its constituents adjusted to exchange rate movements (for ETFs with underlying securities traded on international markets). By construction, it is based on obsolete prices at the times when the markets for underlying securities are closed or inactive.
The estimated net asset value (eNAV) of an ETF aims to correct this limitation of iNAV, providing price adjustments for the underlying basket of securities based on systematic factors reflecting recent global market movements. The adjustment factors reflect the changes of prices of liquid instruments (such as stock index futures or actively traded proxies such as ADRs) that reflect recent developments in the market and would likely affect the actual prices of the underlying basket securities when their primary markets re-open.
Charts below present two cases where more accurate estimates of eNAV in real time may be considered as valuable tools by market makers, other intraday traders, and some institutional investors. The first case pertains to the extreme volatility events on August 24, 2015 and the associated trading disruptions as continuous information about actual market prices becomes unavailable. The second case illustrates how eNAV can bring more transparency for real time pricing of ETF baskets with many constituents traded in different time zones than the ETFs themselves.
Chart 1: Trading halts and other regulatory and technical disruptions
Chart 2:Tracking the market value of ETF baskets in real time for European ETFs