Chris MihosEvery fee, every factsheet and every allocator’s judgement about a fund starts with one number, so it’s worth making sure that number is right and that someone other than the manager produced it.
A fund’s net asset value is the total value of what it holds, less its liabilities, divided across its shares, and it sits underneath almost everything else the fund does. Management fees are charged on it, performance fees and high-water marks are measured against it, subscriptions and redemptions are priced at it, and every report an allocator reads begins with it. That’s why allocators increasingly expect NAV to be calculated by an independent administrator rather than by the manager, reconciled regularly against what the custodian actually holds, and supported by a clear record of where each input came from. A NAV that meets those standards removes a whole category of questions from due diligence, while one that doesn’t can quietly undermine everything built on top of it.
Why NAV is the number everything rests on
When NAV is overstated, management fees are charged on value that doesn’t exist, performance fees are paid on gains that haven’t happened, new holders pay too much for their shares and departing holders take out more than their share. When it’s understated, the reverse happens. Either way, the error passes through every calculation that depends on it, and because those calculations often happen automatically, the error can compound for months before anyone notices.
That’s why regulators treat valuation so seriously. The SEC has brought a long line of cases in which mispriced holdings led to inflated NAVs and excess fees. Calvert paid $27 million to its funds and their shareholders in 2016 after funds were priced at incorrect NAVs, and PIMCO paid an $18.3 million penalty plus disgorgement over the way it valued odd-lot bonds in an ETF. In the Infinity Q case, the SEC alleged that a mutual fund’s NAVs were materially inflated for four years through a mismarking scheme. More recently, in February 2026, the SEC charged a credit fund adviser over how it priced loans moved between affiliated funds, even though the adviser had already reimbursed the fund more than $5 million.
Independence is the point
Most of these cases share a feature: the person or firm valuing the holdings had an interest in the result. A manager who calculates their own NAV may be entirely honest, but an allocator has no way of knowing that from the outside, and the manager’s fee depends directly on the number. Independent calculation by a third-party administrator removes that conflict, which is why it’s become a baseline expectation in institutional due diligence.
For strategies that trade on onchain venues and exchanges, independence has an extra dimension. The inputs themselves can be read directly, from the trading sub-account through a read-only connection and from the custodian’s records, which means the NAV can be built from observed balances rather than from figures supplied by the manager. That’s a stronger foundation than most traditional funds have, provided the infrastructure actually takes advantage of it.
Reconcile daily, not monthly
The other thing that separates a reliable NAV from a fragile one is how often it’s checked. A NAV that’s reconciled against custody only at month end can carry an error for weeks, during which fees accrue and holders come and go at the wrong price. Daily reconciliation, in which the administrator compares the NAV’s inputs against the custodian’s balances every day, means that a discrepancy is caught within a day and can be explained or corrected before it travels into fees and reports.
For allocators, this is one of the clearest signals of operational quality available. A manager who can show a daily reconciled NAV, calculated by an administrator from directly observed balances, has answered most of the valuation questions in a due diligence questionnaire before they’re asked.
How MakeBanc handles NAV
On MakeBanc, NAV is derived from your trading sub-account and the custody balances, reconciled daily and calculated by a third-party administrator. You trade, and the number follows. MakeBanc displays the NAV and the reconciliation behind it, with each input labelled by source, but it doesn’t calculate the value itself, and it doesn’t verify or endorse a manager’s performance beyond what those labels state.
Frequently asked questions
What is NAV in a fund? Net asset value is the total value of a fund’s holdings minus its liabilities, usually expressed per share. It’s the basis for management and performance fees, for pricing subscriptions and redemptions, and for the performance figures shown to allocators.
Why should NAV be calculated independently? Because the manager’s fees depend on it, which creates a conflict of interest. Independent calculation by a third-party administrator removes that conflict and is a standard expectation in institutional due diligence. Many SEC enforcement cases have involved NAVs inflated by the party that benefited from them.
How often should NAV be reconciled? Ideally daily. Reconciling NAV inputs against custodian balances every day means errors are caught within a day, before they affect fees, subscriptions, redemptions or reports.
Sources
- Houlihan Capital, Recent SEC mispricing cases: best practices in valuation
- Mondo Visione, SEC: PIMCO settles charges of misleading investors about ETF performance, 2016
- Seward & Kissel, SEC seeks special master in case involving NAV mismarking scheme, 2022
- Akin Gump, SEC charges credit fund adviser over principal transaction pricing practices, February 2026
MakeBanc is a technology platform that provides infrastructure to independent asset managers and connects them with investors. MakeBanc does not provide investment advice, custody services or banking services. NAV is calculated by a third-party administrator; MakeBanc displays it and does not calculate investment value.