{
    "type": "ETF",
    "ucits": true,
    "replication_method": "physical",
    "leverage": false,
    "derivatives": false,
    "swaps": true,
    "inverse": false,
    "complex_factors": [
        "Swaps",
        "Derivative Instruments",
        "Currency Exposure"
    ],
    "classification": "complex",
    "supporting_data": "The First Trust FactorFX UCITS ETF invests primarily in sovereign fixed income securities and currency-related financial derivative instruments including forward foreign exchange contracts, futures, swaps, and options. The KIID and PRIIPs documents explicitly mention the use of swaps and other derivatives as part of the investment strategy, not merely for risk management but as an inherent element of the fund's exposure to global currencies and related markets. The fund uses currency swaps and forwards with maturities typically between one week and twelve months, mainly one to three months, indicating active derivative usage. The fund is actively managed and invests in below investment grade bonds and emerging market currencies, which adds complexity. The fact sheet confirms the use of currency forwards and swaps to gain exposure to currency carry trade indices, which are complex indices involving short and long positions in multiple currencies. The fund's risk profile is medium (category 3 out of 7), but the presence of derivative instruments, swap agreements, and exposure to complex currency strategies triggers MiFID II complexity classification. There is no leverage or inverse exposure, and replication is physical in the sense of holding sovereign bonds, but the derivative overlay is material and fundamental to the strategy. The derivatives are not solely for hedging but are used to gain exposure, so 'derivatives' is marked true. The fund is UCITS compliant but the use of swaps and derivatives for investment purposes, plus the complexity of the underlying currency carry trade indices, means the fund is complex under MiFID II. No capital protection or structured features are present. Costs are straightforward with no performance fees, but swap usage implies counterparty risk. The PRIIPs KID does not carry a specific comprehension warning but does highlight the need for specific knowledge and experience, consistent with complexity. Therefore, the classification is complex primarily due to the use of swaps and derivatives as an inherent part of the investment strategy and the complexity of the underlying currency carry trade indices."
}