{
    "ucits": true,
    "type": "ETF",
    "leverage": false,
    "derivatives": true,
    "swaps": false,
    "inverse": false,
    "replication_method": "physical",
    "complex_factors": "Use of derivatives for active management and exposure to emerging market local currency bonds",
    "classification": "complex",
    "supporting_data": "The asset is a UCITS ETF, which generally presumes non-complexity under MiFID II. However, this ETF actively invests primarily in emerging market local currency debt securities and uses financial derivative instruments to gain exposure to underlying assets where appropriate. The use of derivatives is not solely for efficient portfolio management but is integral to the active management strategy, which may introduce complexity. The ETF does not seek to replicate the benchmark but aims to outperform it, indicating active management with derivative use beyond simple hedging. The underlying investments include emerging market bonds, which carry higher volatility, credit, and liquidity risks, and the ETF may invest in onshore debt securities through China-Hong Kong Bond Connect and the China Interbank Bond Market, adding regulatory and operational complexity. The risk and reward profile is medium to high (category 5), reflecting significant market and credit risks. According to MiFID II and ESMA guidelines, UCITS ETFs that use derivatives as part of an active strategy and invest in complex underlying assets such as emerging market bonds and structured products are considered complex. The presence of derivatives beyond efficient portfolio management, the active management approach, and the complexity of the underlying assets (emerging market local currency bonds) lead to a classification of complex. This aligns with ESMA's view that synthetic or derivative-based strategies and complex underlying assets increase complexity, requiring an appropriateness assessment for retail investors. Therefore, despite being a UCITS ETF, the active use of derivatives and complex underlying exposures result in a complex classification under MiFID II rules."
}