Hidden Costs in Asset-Backed Units: How Storage/Custody Fees Create NAV vs Market-Price Gaps

When fees are daily and the unit is tradable, our “value anchor” moves every day. If we don’t track that moving anchor, premiums and discounts start to look like a mystery.

Introduction

Asset-backed units (certificates, fund units, or future tokenized real-world assets) are designed to make exposure to a real asset easier to trade. This tradability is a real benefit: it helps price discovery and reduces operational friction compared with moving the asset itself.

At the same time, an asset-backed unit is not the asset. It is a wrapper around the asset, and that wrapper has ongoing costs. In this article we build a simple “running carry” model to understand how storage, custody, insurance, and operational fees change NAV over time—and why the market price can rationally diverge from NAV unless costs are transparent and arbitrage/redemption is practical.

The problem

A common misunderstanding is: “If the underlying asset price is clear, the unit must always trade at that price.”

What’s missing in that statement is time and costs. When a unit represents an asset sitting in an accepted warehouse or under a custodian, costs accrue while we hold the unit. Those costs either:

• reduce the quantity/quality of backing per unit over time, or
• reduce the cash held inside the structure, or
• are charged periodically in a way that effectively reduces NAV.

So even with a perfectly observable spot price for the underlying asset, the unit’s fair value is not static.

NAV vs market price: two different numbers

NAV (Net Asset Value) is the value of the backing per unit after liabilities/fees are accounted for. Think of it as the “accounting value per unit” given what the structure owns and owes.

Market price is the price where buyers and sellers meet in trading. It depends on liquidity, settlement speed, creation/redemption mechanics, and expectations about costs.

In a frictionless world, market makers can arbitrage differences away and keep market price close to NAV. In the real world, frictions exist (timing, fees, limits, minimum sizes), so some gap can persist.

Running carry: the simple model behind NAV drift

“Running carry” is a plain-language way to describe costs that accumulate simply because time passes.

In asset-backed units, typical carry components include:

• Storage / warehousing fees (often daily or monthly)
• Custody (safekeeping) fees for verification and control of the asset
• Insurance (explicit or embedded)
• Operational fees (administration, audits, reporting)

Even if each item is small, their effect is continuous: each day held slightly changes what one unit is effectively worth.

A practical way to express it is:

NAV today = (asset value today) − (accrued carry costs to date)

If fees are charged as a fixed daily amount per unit, the math can be as simple as:

Accrued fees ≈ days held × daily fee

If fees are a percentage, then accrued fees depend on asset value and compounding conventions, but the intuition stays the same: NAV drifts because carry accrues.

How fees create premiums/discounts without “mystery”

Once we accept NAV is moving, the premium/discount story becomes more readable.

• If the market price is above NAV, we see a premium. This can happen when access is scarce, settlement is slow, or demand for immediacy is high.
• If the market price is below NAV, we see a discount. This can happen when redemption is difficult, fees are unclear, or there is uncertainty about how costs will be settled.

Carry costs matter because they are not just “small expenses.” They are a predictable drag on NAV. When arbitrage is costly or slow, the market may not constantly update price to match NAV—especially when fee disclosure is incomplete or hard to model.

A practical framework: a fee-to-NAV worksheet (what we can compute)

To make the storage fee impact NAV visible, we can use a simple worksheet. We do not need complex finance.

1. Define what one unit represents

• How much of the underlying asset backs one unit at issuance (e.g., grams/ounces, or a share in a pooled inventory)?

1. List recurring fees (carry)

• Storage/warehouse
• Custody/safekeeping
• Insurance (if separate)
• Administration/other operating fees

1. Confirm the accrual method

• Are fees accrued daily and reflected in NAV continuously?
• Or are they collected periodically (e.g., monthly), creating step-changes?

1. Map settlement timing

• When are fees paid, and from what source (cash balance, sale of a small part of the asset, or direct charge to holders)?
• What is the settlement cycle for trading, and does it delay arbitrage?

1. Compute a “carry drag” estimate

• For fixed daily fees: carry drag over N days ≈ N × daily fee per unit
• For percentage fees: estimate using (fee rate × time × NAV) with the stated convention.

Even this rough model dramatically improves how we interpret a premium/discount.

A simple example (hypothetical): bullion in an accepted warehouse

Assume a tradable unit represents bullion stored in an accepted warehouse. The bullion spot price is transparent, so we might expect the unit to track it closely.

Now add the real-world layer: the warehouse charges a daily storage fee (and possibly a custody/handling fee), and the structure periodically settles these fees.

Over 60 days, even a small daily fee accumulates. If the bullion spot price stays flat, NAV still declines because carry has been accruing. A buyer who ignores this will compare today’s unit price to the bullion price and conclude “it’s mispriced,” while the market may simply be reflecting accrued storage/custody costs and settlement frictions.

This is not theoretical. Market-wide coverage around commodity-backed instruments in Iran has referenced the existence of daily warehouse/storage fees and how such fees are settled, which highlights that running custody costs are a practical feature of these structures.

Risks and limitations (implementation considerations)

Fee-driven NAV drift becomes confusing mainly when execution details are unclear. Common considerations include:

• Opaque fee schedules: if the fee table is incomplete or hard to find, pricing becomes guesswork.
• Unclear accrual rules: daily accrual vs periodic collection changes how NAV behaves.
• Settlement timing and trading halts: if settlement cycles are long or trading is interrupted, arbitrage can’t keep price close to NAV.
• Redemption frictions: minimum sizes, paperwork, or limited windows can prevent efficient convergence.
• Data quality: when NAV publication is delayed or methodology is unclear, market price may become the only “live” signal.

Tokenization (or broader digital infrastructure) can improve transparency and traceability of balances, fee accrual, and event logs. Its strongest results come when the operational layer—custody controls, valuation methodology, and disclosure discipline—is designed alongside the digital layer.

Conclusion

Asset-backed units make real assets more tradable, but they also introduce a “running carry” layer. Storage, custody, insurance, and operational fees steadily reduce NAV over time even when the underlying asset price is unchanged.

That is why market price can rationally diverge from NAV, especially when arbitrage/redemption is not frictionless. When we make costs visible—fee schedule, accrual method, and settlement timing—the NAV anchor becomes trackable, and premiums/discounts become interpretable rather than mysterious.

FAQ

1) If the underlying asset price is transparent, why doesn’t the unit always match it?

Because NAV is the asset value minus accrued fees and liabilities. Carry costs change NAV over time, and trading frictions can prevent instant convergence.

2) Which disclosures matter most for understanding price vs NAV?

The fee schedule (what is charged and how often), the accrual method (how it hits NAV), and settlement/redemption timing (how quickly arbitrage can work).

3) How can we compare two similar units with different fee schedules?

We can estimate “carry drag” over a common holding period using each product’s published fees and accrual rules, then compare expected NAV drift before judging premiums/discounts.