{
    "type": "ETF",
    "ucits": true,
    "replication_method": "physical",
    "swaps": true,
    "derivatives": false,
    "leverage": false,
    "inverse": false,
    "complex_factors": "Use of interest rate swaps and currency derivatives for hedging and investment purposes",
    "classification": "complex",
    "supporting_data": "The First Trust Low Duration Global Government Bond UCITS ETF primarily invests in sovereign fixed income securities globally, with an actively managed strategy. The fund uses financial derivative instruments including forward foreign exchange contracts, currency futures, interest rate futures, and interest rate swaps both for hedging currency and interest rate risk and for investment purposes. The KIID and PRIIPs KID explicitly mention the use of interest rate swaps and futures for investment purposes, not solely for risk management, which under MiFID II implies derivative exposure inherent to the investment strategy. The fund does not employ leverage or inverse strategies, and the replication is physical (direct investment in bonds). The portfolio consists mainly of investment grade sovereign bonds with some exposure to below investment grade capped at 30%. The risk indicator is low to medium (category 2-3), but the presence of derivatives used for investment purposes and the potential exposure to leveraged underlying schemes (as noted in risk disclosures) contribute to complexity. There is no capital protection or structured product features. Costs are straightforward with no performance fees, but ongoing charges include derivative-related transaction costs. The fund is UCITS compliant. The complexity arises mainly from the use of interest rate swaps and futures for investment purposes, which are derivative instruments integral to the fund\u2019s strategy, and the potential counterparty risk associated with these OTC derivatives. Although the derivatives are not used for leverage, their presence and the active management of interest rate exposure classify the ETF as complex under MiFID II. There is no mention of synthetic replication or swap-based replication structures, so replication is physical. The PRIIPs KID does not carry a comprehension warning but does highlight the need for specific knowledge or experience, consistent with complexity. Overall, the fund\u2019s derivative use for investment purposes and counterparty risk exposure drive the complex classification despite a low risk rating and physical bond holdings."
}