9.1 NAVPU Formula and Daily Mark-to-Market
Key Takeaways
- NAVPU = (Fair value of fund assets − liabilities and accrued fees) ÷ outstanding units of participation; bank corporate assets are never included.
- UITF portfolios with tradeable holdings are valued on a mark-to-market / fair-value basis, not historical cost, so NAVPU moves with market prices.
- NAVPU is computed daily on dealing days under Plan Rules; the published unit price is the economic meter for every subscription and redemption.
- Accrued trust fees, operating expenses, and fund liabilities reduce net assets before the unit price is struck—ongoing fees drag NAVPU over time.
- CUSP personnel must explain NAVPU without implying a fixed deposit balance, guaranteed principal, or PDIC coverage.
Why NAVPU is the product’s scoreboard
Everything a UITF participant owns economically reduces to one equation: units × NAVPU. Modules on fund classification tell you what a money-market or equity UITF may hold; this section tells you how the daily price of a unit is built. On the TOAP UCP exam, weak NAVPU literacy produces wrong answers on valuation, fees, mark-to-market, and client-facing explanations. On the branch floor, weak NAVPU literacy produces deposit-style misselling.
NAVPU means Net Asset Value per Unit. It is the fair residual value of the fund attributable to one unit of participation after liabilities and accrued expenses. It is not a bank “interest rate,” not a guaranteed redemption floor, and not a price that includes the trustee bank’s own corporate balance sheet.
The core formula (memorize exactly)
NAVPU = (Fair value of fund assets − liabilities and accrued fees) ÷ outstanding units of participation
| Component | What it includes | Exam pitfall |
|---|---|---|
| Fund assets (fair value) | Cash and investments belonging to the UITF under trust; valued at current market / fair value for tradeable portfolios | Using historical cost instead of market for tradeable holdings |
| Liabilities | Amounts the fund owes (e.g., unsettled payables consistent with fund accounting) | Forgetting that liabilities reduce net assets |
| Accrued fees / expenses | Trust/management fee accruals, custodianship and allowed operating charges as they accrue | Thinking fees are billed only as a separate invoice to the client’s deposit account |
| Outstanding units | All units of participation currently in issue for that fund (or class, for multi-class designs) | Dividing by “number of clients” instead of units |
| Bank corporate assets | Never included | Mixing the commercial bank’s own securities into the UITF NAV |
What “fair value of assets” means
For a UITF that holds tradeable securities—Treasury bills and bonds, listed equities, other marketable instruments allowed by Plan Rules—the trustee does not leave those holdings frozen at purchase cost for unit pricing. Under Philippine UITF practice aligned with PFRS 9 fair-value thinking for tradeable / FVTPL-style portfolios, eligible holdings are marked to market (or otherwise fair-valued using approved valuation policies when a deep market quote is thin). That mark is what “fair value of assets” means in the NAVPU formula.
What is never in the numerator
- Bank proprietary / corporate assets — securities owned for the bank’s own account are outside the UITF.
- Other clients’ separate trust accounts that are not part of this pooled UITF.
- PDIC insurance value — there is none to add; UITFs are not PDIC-insured.
- A “guaranteed principal buffer” from the trustee — the trustee does not inject a free guarantee line into NAV.
If you remember only one segregation sentence for valuation: Only assets of the fund enter NAV; the bank’s own book stays out.
Daily mark-to-market—not historical cost
Mark-to-market (MTM) means portfolio positions are revalued to current market prices (or fair-value proxies per policy) so that net assets—and therefore NAVPU—reflect today’s economics, not last year’s purchase tickets.
Why MTM matters for every fund type
| Fund orientation | What typically moves NAVPU |
|---|---|
| Money market | Short-rate and money-market instrument prices/yields; usually smaller swings, still not a deposit |
| Fixed income / bond | Bond prices move inversely with yields; duration amplifies the move |
| Equity | Share prices and equity index moves |
| Multi-asset | Blend of the above per allocation |
| Feeder / FoF | NAV of target CIS holdings (still fair-value driven at the feeder/FoF level) |
Historical cost is the wrong mental model for tradeable UITF books
A client may say: “Bumili kayo ng bond at 100; bakit bagsak ang NAVPU ko?” Correct answer: the fund’s bond may still pay coupons and mature at face if held to maturity by the fund, but unit pricing uses current fair value. If market yields rose, the mark on that bond fell, fund net assets fell, and NAVPU fell—even without a default. That is market risk, not a trustee “error” and not a PDIC event.
Regulations and operations chapters return to PFRS 9 classification in depth. For Module 2 product knowledge, the tested idea is simple: tradeable UITF portfolios are valued at market; NAVPU is daily; participants bear the valuation result.
Accruals, income, and the “silent” daily change
NAVPU does not move only when a trader hits a bid. On a quiet day with little price change, net assets can still shift because of:
- Interest / discount amortization and coupon accruals on fixed-income holdings (policy-consistent recognition)
- Dividend accruals where applicable for equity funds
- Trust fee accruals and other allowed expenses that reduce net assets
- Cash movements from subscriptions and redemptions (which also change units outstanding—see Section 9.2)
Ongoing trust/management fees are typically accrued against the fund, so they show up as a slow downward drag on NAVPU rather than as a separate “interest debit” like a loan amortization on a deposit account. That is why performance discussions must always be net of fees embedded in NAVPU history.
Worked PHP examples
Example A — Basic NAVPU strike
A peso fixed-income UITF has the following at the valuation cut used for today’s NAVPU:
- Fair value of investments and cash in the fund: PHP 125,000,000
- Accrued liabilities and accrued trust/operating charges: PHP 500,000
- Outstanding units: 100,000,000
Net asset value = 125,000,000 − 500,000 = PHP 124,500,000
NAVPU = 124,500,000 ÷ 100,000,000 = PHP 1.245000
Client Ana holds 80,000 units. Market value of her participation ≈ 80,000 × 1.245 = PHP 99,600.
Example B — Mark-to-market shock (rates up)
Same fund, next dealing day. Bond markets reprice lower after a yield spike:
- Fair value of assets: PHP 122,000,000
- Liabilities and accruals: PHP 510,000
- Units still 100,000,000 (no net unit activity for simplicity)
NAV = 122,000,000 − 510,000 = PHP 121,490,000
NAVPU = 121,490,000 ÷ 100,000,000 = PHP 1.214900
Ana’s 80,000 units ≈ PHP 97,192. The decline is market valuation, not a bank “breaking” a time deposit. A CUSP must be able to narrate Example B without promising that NAVPU will “return” to 1.245 on a fixed date.
Example C — Why bank assets must stay out (trap)
Suppose a confused staffer adds PHP 5,000,000 of the bank’s proprietary bond inventory into the UITF asset line. That is wrong. Those bonds are not fund assets. Including them would inflate NAVPU unfairly, breach segregation, and misstate every participant’s beneficial interest. Correct NAVPU uses only trust-fund assets.
Example D — Fee accrual effect (simplified)
Mid-month, ignore market moves. Net assets before today’s fee accrual: PHP 50,000,000; units 40,000,000; NAVPU = PHP 1.250000. Accrue PHP 20,000 trust fee for the day:
- New NAV = 50,000,000 − 20,000 = PHP 49,980,000
- NAVPU = 49,980,000 ÷ 40,000,000 = PHP 1.249500
Tiny daily, material over a year. Clients feel fees through NAVPU, not through a separate passbook interest line.
Frequency: daily computation
Philippine UITF practice and UCP teaching baseline: NAVPU is computed daily (on fund dealing/valuation days as defined in Plan Rules and bank procedures). Marketing materials and exam stems treat daily NAVPU as the standard. Always defer to the fund’s Plan Rules for exact valuation time, dealing calendar, holidays, and any extraordinary suspension language—but do not invent a weekly-only UITF as the normal model.
Daily computation supports:
- Fair dealing between subscribers and redeemers (same-day economics under cut-off rules)
- Transparent performance reporting (NAVPU history)
- Regulatory consistency with mark-to-market expectations for tradeable books
Client conversation skills (exam + mystery shop)
Accurate:
“Your UITF is valued daily. The NAVPU is the fund’s assets at fair market value, minus liabilities and accrued fees, divided by units. When markets move, your unit price moves. This is not a deposit and is not PDIC-insured.”
Inaccurate / prohibited patterns:
- “NAVPU is just like your savings balance—hindi yan bababa.”
- “Kasama ang assets ng bangko, kaya safe.”
- “We use purchase cost so you won’t see market losses.”
- “PDIC covers any NAVPU decline.”
Link to later transaction mechanics
Section 9.2 applies this price to subscriptions and redemptions after cut-off. Section 9.3 overlays minimum holding periods and early redemption charges that can reduce cash proceeds even when the NAVPU math is clear. Valuation is the foundation; dealing rules are the doorway; holding-period charges are the exit friction when Plan Rules impose them.
Exam traps for this section
- NAVPU = assets ÷ units with no liability subtraction — wrong; subtract liabilities and accrued fees first.
- Including bank corporate assets — never.
- Historical cost pricing for tradeable portfolios — wrong baseline; use mark-to-market / fair value.
- Confusing NAVPU with a guaranteed principal amount — NAVPU can fall.
- Thinking fees never affect unit price — accruals reduce net assets and NAVPU.
- Weekly or “whenever the RM feels like it” valuation as the standard — daily is the teaching baseline.
Memory line
NAVPU = (fair-valued fund assets − liabilities & accrued fees) ÷ units; daily MTM; bank’s own assets out; participant bears the market result.
Which formula correctly expresses NAVPU for a Philippine UITF?
A peso bond UITF’s holdings fall in market price after yields rise, with no issuer default. What is the most accurate effect on participants?
Fund assets at fair value are PHP 80,000,000; liabilities and accrued fees are PHP 400,000; units outstanding are 64,000,000. What is NAVPU?
Why must bank corporate (proprietary) assets be excluded from UITF NAVPU?