NYLI Merger Arbitrage ETF (MNA US) – Portfolio Construction Methodology

The underlying NYLI Merger Arbitrage Index targets announced, friendly cash, stock, or mixed-consideration takeovers of developed-market companies and pairs long positions in targets with short positions in acquirers when stock consideration is offered. Monthly, eligible deals from FactSet MergerStat and similar sources are screened to exclude negative spreads and spreads below a risk-free-rate-based floor, and to meet minimum size and liquidity thresholds. Target weights follow a transaction-size rank formula with max 7.5% (reduced to 4.5% for securities-related issuers); a 0.15% minimum applies. The acquirer short “hedge ratio” is reset monthly proportional to the stock consideration and target weight. Unallocated cash and post-close proceeds are held in a short-term bond ETF and, if cash reaches ≥25%, in U.S. Treasury bills. Deals exit at close, termination, age ≥360 days, negative spreads, or adverse momentum. Reconstitution and rebalancing occur monthly (effective early month).

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