{
    "type": "ETF",
    "ucits": true,
    "fund_name": "HSBC MSCI JAPAN UCITS ETF",
    "replication_method": "physical",
    "leverage": false,
    "derivatives": false,
    "swaps": true,
    "inverse": false,
    "complex_factors": [
        "Swaps",
        "Derivative Exposure"
    ],
    "classification": "complex",
    "supporting_data": "The fund aims to track the MSCI Japan Index primarily through physical replication of the underlying shares. However, the KIID and PRIIPs KID explicitly state that the Fund may invest up to 10% of its assets in total return swaps and contracts for difference, and may use derivatives for efficient portfolio management and investment purposes. The monthly factsheet confirms physical full replication as the primary method but acknowledges derivative usage up to 10%. The presence of total return swaps and contracts for difference, even at limited levels, introduces counterparty risk and derivative complexity. There is no leverage or inverse exposure, and the fund is UCITS compliant. The risk profile is high (category 5-6), reflecting market volatility and derivative risks. The use of swaps and derivatives for gaining exposure when direct investment is impractical, combined with securities lending up to 30%, adds complexity under MiFID II. Although derivatives are not used for leverage, their presence as an inherent part of the investment strategy (up to 10%) mandates classification as complex. No capital protection or structured features are present. Costs are straightforward with no performance fees, but derivative-related costs exist. The PRIIPs KID does not carry a specific comprehension warning but highlights counterparty and investment leverage risks. Overall, the ETF\u2019s partial synthetic exposure via swaps and derivative instruments, despite physical replication predominance, drives the complex classification under MiFID II."
}