{
    "type": "ETF",
    "ucits": true,
    "replication_method": "physical",
    "leverage": false,
    "derivatives": false,
    "swaps": true,
    "inverse": false,
    "complex_factors": [
        "Use of currency swaps and derivatives",
        "Investment in below investment grade sovereign bonds",
        "Active management with discretionary asset selection",
        "Exposure to emerging market currencies and related FX derivatives"
    ],
    "classification": "complex",
    "supporting_data": "The First Trust FactorFX UCITS ETF is an actively managed UCITS-compliant ETF investing primarily in sovereign fixed income securities denominated in local currencies of developed and emerging markets, combined with currency-related financial derivative instruments including forward foreign exchange contracts, futures, swaps, and options. The fund explicitly uses currency swaps and other derivatives as an inherent part of its investment strategy, not merely for risk management. The KIID and PRIIPs documents mention the use of swaps and derivative instruments extensively, including currency swaps and futures with maturities typically between one week and twelve months. The fund invests in below investment grade sovereign bonds and emerging market currencies, which adds complexity due to credit risk and market volatility. The fund is actively managed with discretion to deviate from the benchmark indices, which themselves are complex currency carry trade indices. The risk profile is moderate (category 3-4), but the presence of derivative instruments, swap agreements, and exposure to complex FX carry strategies and emerging market debt leads to a classification of complex under MiFID II. There is no leverage or inverse exposure, but the use of swaps and derivatives as a core part of the strategy, combined with the complexity of the underlying assets and indices, drives the complex classification. The fund does not use synthetic replication in the sense of total return swaps to replicate an index, but it uses derivatives extensively for exposure to currencies and related markets. The derivatives are not solely for hedging but are integral to the investment approach. Costs are straightforward with no performance fees, but the ongoing charges include transaction costs related to derivatives trading. The PRIIPs KID does not carry a specific comprehension warning but does highlight that the product is intended for investors with specific knowledge or experience in similar products, which supports the complexity assessment."
}