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Each ETFT has a methodology defining its eligible assets, selection rules, target weights, cash policy, and rebalance conditions. The methodology distinguishes routine portfolio changes from changes to the investment mandate itself.

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Target and actual weights

Target weights describe the intended allocation. Actual weights reflect the assets and exposures held. Market movement, execution constraints, cash, costs, and corporate actions can create differences. Equity portfolio weights and derivative notional exposure are not interchangeable. A leveraged product reports the relevant exposure measures against NAV rather than presenting notional as fully owned securities.

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Rebalance triggers

A product can use scheduled reviews, allocation-deviation thresholds, new public disclosures, manager decisions, or corporate events. The product defines which triggers apply and how quickly they are acted upon. Leveraged and inverse products additionally follow their exposure reset rules.

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Execution sequence

The process translates a valid trigger into target positions, checks tradability and risk constraints, executes within permitted windows, and reconciles the resulting portfolio. Available cash flows can be used to reduce allocation deviations before additional turnover is required. If an asset cannot be traded, the product follows its published fallback: retain cash, delay execution, or use an explicitly permitted substitute. An execution issue does not authorize an undisclosed strategy change.

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Corporate actions and income

Splits, mergers, delistings, and distributions are reflected in units of the underlying asset, cash, receivables, or the applicable valuation treatment. A stock split does not itself create portfolio profit. Dividends may first be recorded as receivables and later become cash. Receipt does not create income a second time. Reinvestment or distribution follows the product’s policy, including applicable taxes and withholding.

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Methodology changes

Material changes to asset selection, leverage, benchmarks, fees, or manager authority follow the product’s notice and authorization process. Methodology versions and effective dates allow investors to identify which rules applied to a historical portfolio.