{
    "ucits": true,
    "type": "ETF",
    "leverage": false,
    "derivatives": true,
    "swaps": true,
    "inverse": false,
    "replication_method": "active_management",
    "complex_factors": "Use of total return swaps and contracts for difference; active management with deviation from benchmark; securities lending up to 30%; exposure to derivatives for investment purposes",
    "classification": "complex",
    "supporting_data": "The HSBC Multi Factor Worldwide Equity UCITS ETF is a UCITS-compliant ETF, actively managed and not tracking a benchmark directly, but referencing MSCI AC World Net. It invests at least 90% in shares globally, including emerging markets and China A-shares, and may invest up to 10% in other funds. Importantly, it may invest up to 10% in total return swaps and contracts for difference, with derivative exposure not expected to exceed 5%. It also engages in securities lending up to 30% of assets. The use of derivatives is for both investment and efficient portfolio management purposes. The fund is classified in risk category 6 (high risk) due to price fluctuations. According to MiFID II and ESMA guidelines, UCITS ETFs are generally non-complex unless they embed derivatives integral to the investment strategy or have complex features. Here, the use of total return swaps and contracts for difference as part of the investment strategy introduces counterparty and collateral risks, which are difficult for retail investors to understand. The active management with significant deviation from the benchmark and securities lending further add to complexity. The replication method is not purely physical but involves derivatives, making it synthetic or hybrid in nature. Under MiFID II Article 254 and Delegated Regulation EU 2017/565 Article 57, such derivative use integral to the investment objective and the presence of swaps classify the ETF as complex. Therefore, despite being a UCITS, this ETF is complex due to its derivative use, active management, and securities lending, requiring an appropriateness assessment for retail investors.",
    "explanation": "The ETF is UCITS compliant but uses derivatives (total return swaps and contracts for difference) integral to its investment strategy, not just for efficient portfolio management. It also engages in securities lending and active management deviating materially from the benchmark. These features introduce counterparty risk, collateral risk, and complexity in understanding the payoff and risks for retail investors. According to MiFID II and ESMA guidelines, such derivative use and complex structures classify the ETF as complex."
}