{
    "type": "ETF",
    "ucits": true,
    "replication_method": "physical",
    "swaps": true,
    "derivatives": false,
    "leverage": false,
    "inverse": false,
    "complex_factors": "Currency Hedging via OTC Forwards, Counterparty Risk, Derivative Use for Hedging",
    "classification": "complex",
    "supporting_data": "The UBS (Lux) Fund Solutions - MSCI Japan UCITS ETF (hedged to GBP) primarily invests in Japanese equities and aims to replicate the MSCI Japan 100% hedged to GBP Index. The replication method is physical full replication of the underlying equities, as confirmed by the factsheet. However, the fund uses derivatives, specifically OTC currency forwards, to hedge currency risk between JPY and GBP. The KIID and PRIIPs KID explicitly mention the use of derivatives for hedging and efficiency purposes, with associated counterparty risk mitigated by collateral policies. The derivatives are not used for leverage or amplification of returns but as an inherent part of the currency hedging strategy. The fund does not employ leverage, inverse exposure, or complex structured products. The risk profile is medium (4 out of 7 in PRIIPs KID) and higher (6 out of 7) in the KIID, reflecting equity market volatility rather than derivative complexity. The presence of OTC derivatives and counterparty risk, even if for hedging, triggers MiFID II complexity classification. No capital protection or structured features are present. Costs are straightforward with no performance fees, and the TER is low (0.15%). The fund is UCITS compliant and physically replicates the index, but the use of OTC derivatives for currency hedging and the associated counterparty risk lead to a classification as complex under MiFID II rules."
}