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NAV Reporting For Crypto Funds

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The future of crypto funds is expected to grow tremendously over the next few years, as cryptocurrencies become more regulated, trusted and a lucrative investment instrument.

In 2018-19, millions poured into institutional and family crypto funds, with digital assets either central to the fund portfolio or in addition to a variety of traditional investments.

When it comes to software and technology, it is imperative for fund operators and investors, to have access to key features features like, Net Asset Value reporting.

What is Crypto NAV Reporting?

NAV – Net Asset Value – indicates the net value of an asset, fund or portfolio, subtracted by the total value of liabilities. For cryptocurrency funds, the value of the NAV result represents the per-share/unit price, at a specific time or date. Net Asset Value is only determined every 24 hours and the existing assets and liabilities.

The basic formula for calculating NAV is relatively simple:

NAV = (Assets – Liabilities) / Total Number of Outstanding Shares/Units

Why is Crypto NAV Reporting important?

Once a fund has generated enough capital to begin investing, the total percentage of the fund is divided into “shares”, based on the initial investment every individual or party committed. Operators and investors have an inherent interest in reviewing the health of the funds performance. Operators will often check on end-of-day NAV results, to help identify areas that may need attention and modification. They also share this information with the funds analysts to optimize performance and to provide quarterly and annual reports to the fund investors

Additionally, fund investors will want to see a clear picture of the value for their specific volume of shares/units at any given time. By tracking fund performance with instant and accurate reporting, funds and investors alike are empowered with actionable intelligence for smarter decision making.

What are assets and liabilities?

Unlike traditional investments, which trade value fluctuates from second to second, NAV reporting is predicated on the end-of-day methodology, according to assets and liabilities.

Assets – The total market value of the funds investments, cash/money owed, pending receivables and accrued net income. The market value is determined by calculating all positive valued assets at the end of the fiscal day. This can include cash, pending payments, interest and more. The sum of all of these line items form the daily value of the fund.

Liabilities – This term related to any money owed from the fund to its investors, pending payments, an assortment of possible charges and fees and other expenditures. This may include salaries, overhead costs, transfer fees, conversion costs, immediate, operational and long-term expenses. Outflows that are in the negative or owed are incorporated as liabilities.

When calculating the final NAV report for a specific day, the aforementioned line items are all taken into consideration when determining final value for the funds and asset units/shares.

Measuring fund performance

It is natural for fund operators to be vigorously reviewing and tweaking their funds to improve overall performance and net higher profits for investors. That is why it is exceptionally important to always be reviewing and measuring the performance of the fund. Some funds do this by comparing the NAV at 1-month, 6-months and annual intervals to determine the growth value in percentages over time.

For a more accurate and reliable method of measuring fund performance, fund operators or managers analyze the annual total return. The annual total return is the actual rate of return for an investment pools success, which is evaluated over a specific period of time. Both fund analysts and investors will review the compounded annual growth rate (CAGR). CAGR represents the total annual growth rate of an investment over a specific period of time (longer than one year).

There are new and more effective methods of measuring fund performance, and in the next few months, the ability to zoom in on areas of fiscal challenges and learn how to turn challenges to revenue generating opportunities.

The future of crypto accounting and tax will need smart solutions to handle Crypto Net Asset Value Reporting. That is why Blox, an industry-leading platform, is dedicated to providing investors, fund operators and professionals with the essential tools they require.

To get a demo and learn more about the Blox platform, visit this link to book a demo!

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