How Staking Rewards Impact Net Asset Value: What Investors Should Know

For investors in digital asset fund products that include staking participation, understanding how staking rewards interact with net asset value (NAV) is essential. Staking is the process by which certain blockchain networks reward participants for locking digital assets to help validate transactions and secure the network. When a fund product participates in staking, those rewards are generated at the fund level — but how they flow through to investors, and how they affect the price per share, requires careful consideration.

Key Factors That Influence Staking Reward Outcomes:

• Gross vs. Net Staking Rewards: Gross staking rewards represent total rewards earned before fees. Net rewards reflect what remains after management and operational expenses are deducted.
• Reward Variability: Staking rewards are not fixed. They can change materially based on network participation rates, protocol adjustments, and the overall amount of assets staked across the network.
• Fee Accrual and NAV Reduction: Management fees are typically accrued daily and reduce the amount of the underlying digital asset represented per share over time — even as staking rewards may partially offset that reduction.
• Staking Risk: Staking exposes the fund to operational and protocol risks, including slashing events on certain networks, where a validator's misbehavior can result in a reduction of staked assets.
• Reinvestment vs. Distribution: Some fund structures reinvest staking rewards back into the fund, increasing the amount of the underlying asset held per share. Others may distribute rewards or use them to offset fees.
• Tax Treatment: Staking rewards received by a fund may have tax implications for investors depending on jurisdiction and fund structure. Investors should consult a tax advisor for guidance specific to their situation.

How Staking Rewards Interact with NAV in Practice

In a staking fund, the NAV per share reflects the total value of the underlying digital assets held by the fund — including any staking rewards that have been accumulated — divided by the number of outstanding shares. When a fund earns staking rewards, those rewards increase the total asset value, which in turn increases the NAV per share — all else being equal. However, management fees, which are accrued daily, work in the opposite direction: they reduce the total assets under management over time, decreasing NAV per share gradually. For investors, the net effect of staking rewards versus fee drag determines whether the quantity of underlying assets represented per share grows, stays flat, or declines over time.

What This Means for Investors

Investors evaluating staking-based digital asset fund products should focus on the net staking reward rate — after management fees and other costs — rather than the gross reward rate alone. The spread between gross and net rewards reflects the total cost burden on the fund. Additionally, because staking rewards are not guaranteed, investors should not treat them as a fixed income equivalent. They are a feature of network participation that can change over time as protocol economics evolve and network conditions shift.

Starwal's Approach to Staking Transparency

Starwal discloses both gross and net staking reward rates for its staking-based products, allowing investors to understand the full cost impact on their exposure. The Starwal Solana Staking Fund (GSOL), for example, reports a gross staking reward of 6.56% with 100% of fund assets staked. Starwal is committed to providing the level of transparency investors need to evaluate each product's economic structure with confidence.