Concerns Arise Over ETF NAV Calculation Errors
Recently, calculation errors in the net asset value (iNAV) of exchange-traded funds (ETFs) have raised concerns about potential investor harm. The Financial Supervisory Service is currently investigating the facts, but the lack of clear compensation criteria has delayed subsequent measures.
These iNAV errors mainly stem from system errors within asset management companies, with some ETFs reportedly having higher iNAVs than actual. Consequently, investors risk incurring losses by trading based on inaccurate information.
Moreover, issues of information asymmetry between liquidity providers (LP) and general investors have come to light, and questions are being raised about the responsibility of asset managers. Industry experts highlight that even when data management is outsourced, ultimate responsibility rests with the asset managers, underlining the need for robust internal verification systems. There is a pressing need to restructure related procedures and develop strategies to safeguard investors to restore confidence in the ETF market.
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Repeated ETF iNAV Errors…'Investor Compass' Trust is Shaken - Yonhap InfomaxErrors in the intraday real-time indicative net asset value (iNAV) calculation of exchange-traded funds (ETFs) have been occurring repeatedly, causing confusion in the market. The repeated errors in iNAV, known as the 'compass' for investment decisions, are increasingly raising concerns about market trust. The ETF 'compass' frequently exposed to errors is shaking the basis for investor judgment. iNAV (indicative Net Asset Value) is calculated by reflecting the real-time value of underlying assets such as stocks and bonds held by ETFs. Calculated in real-time, investors use it to compare with the ETF market price and calculate the deviation ratio ((market price-iNAV)/iNAV).
Despite Frequent ETF NAV Errors…Why Compensation Is Difficult - Yonhap InfomaxRecently, for two consecutive trading days, errors in the calculation of the net asset value (iNAV) of exchange-traded funds (ETFs) have occurred. However, it seems difficult for the investor compensation process to be completed in a short period of time. The industry and authorities acknowledge investor damage, yet the lack of clear compensation standards and procedures prevents rapid follow-up measures. According to the Financial Supervisory Service and the financial investment industry as of the 1st, there is no concrete plan yet to estimate investment losses due to recent ETF iNAV calculation errors. This issue originates from a system error in calculating the net value of ETFs by asset management companies.