How a fund's APR is actually calculated

Every fund quotes a yield. Almost nobody shows the arithmetic. That matters, because two people can take the same published data and produce very different-looking numbers — both technically correct, only one of them honest about what it measures.

This is the exact method behind the live APR figures on the Earn page, and what to check when you see a yield quoted anywhere else.

Start with NAV per unit

A fund's net asset value per unit is what one unit of the fund is worth: everything the fund owns, minus what it owes, divided by the number of units in issue. It is published daily.

If you hold units and the NAV per unit rises, you made money. So the return over any window is simply:

Return = (NAV at the end ÷ NAV at the start) − 1

Nothing more exotic than that. A NAV that goes from 1.0000 to 1.0028 over 30 days is a 0.28% return for those 30 days.

Turning a return into an APR

A 30-day return of 0.28% is not "0.28% a year" and it is not "3.4% a year" either — until you say how you annualised it. There are two conventions:

• Simple annualisation: return × 365 ÷ days. A 0.28% return over 30 days becomes 3.41% p.a.
• Compounded annualisation: assumes you keep reinvesting, which produces a slightly higher number.

We use the simple, 365-day basis, because that is what the fund manager's own published performance figures use. Mixing conventions is one of the easiest ways to make a fund look better than its factsheet says it is — and to end up unable to reconcile your number against theirs.

Gross versus net, and why the fee matters

A fund's NAV is published after the daily-accrued management fee has been taken out. So a NAV-derived return is a net return — what you would actually have received.

If you want to compare a fund against, say, a fixed deposit rate quoted before costs, you have to add the fee back to get a gross figure. That is the only reason to do it, and it should always be labelled. The Earn page shows gross yields and states each fund's fee alongside, so you can move between the two.

There is a trap here. If a manager waives a fee partway through a period, adding back a flat annual fee across the whole window invents yield that was never charged. The fee has to be weighted by the days it actually applied.

Four ways an honest-looking APR misleads

1. The window is too short. Annualising a 7-day return multiplies whatever happened that week by roughly 52. On a money-market-style fund where a normal day moves NAV by a hundredth of a percent, one slightly unusual day can swing the 7-day APR by several percentage points. It is not wrong, it is just noise wearing a suit. Prefer 30 days or longer.

2. A one-off credit is treated as yield. If a manager refunds something into the fund — a fee rebate, a settlement, a correction — the NAV jumps once. Annualising that jump projects a one-time payment forward as if it recurs every year. The money is real; the implied rate is fiction. One-off credits should be stripped out of the yield calculation and disclosed separately, which is what we do on the USD fund's card.

3. The window starts before the fund did. A newly launched fund often sits at par (1.0000) for weeks while it takes in money but has not deployed it. Including those flat days drags the measured return down and understates the running yield. The window should start when the fund actually started working.

4. Gross is compared against net. A gross fund yield next to a net bank rate is not a comparison, it is a thumb on the scale. Check what each side includes.

A cross-check anyone can run

Here is a test that costs nothing. For a money-market or short-duration income fund — the kind whose whole job is to be boring — the APR should look roughly the same over 30 days, 90 days, and since launch. That is what "steady" means.

If the 30-day number is materially different from the 90-day and since-launch numbers, something is going on: a one-off event inside one of the windows, a fee change, or a mistake in the maths. It is not automatically bad news, but it is always a question worth asking. This is exactly how we caught a one-off rebate distorting one fund's trailing figure.

For a volatile fund — equities, digital assets — this test does not apply at all. Their returns are supposed to vary by window.

What to ask when you see a yield

• Over what period, and annualised how?
• Gross or net of fees, and which fees?
• Does it include anything non-recurring?
• Is it derived from published NAV you can check, or is it a target?

Every figure on the Earn page is computed from the fund's own daily NAV, over a window you choose, and shows its workings — the period start, the NAV, the fee added back, and the manager's published figure alongside for reconciliation.