{
    "ucits": true,
    "type": "ETF",
    "leverage": false,
    "derivatives": true,
    "swaps": true,
    "inverse": false,
    "replication_method": "synthetic",
    "complex_factors": "Use of total return swaps, structured products exposure, synthetic replication, counterparty and collateral risk",
    "classification": "complex",
    "supporting_data": "The HSBC Asia Pacific ex Japan Sustainable Equity UCITS ETF invests up to 15% of its assets in total return swaps and contracts for difference, with derivative use not expected to exceed 5%. It also uses derivatives for efficient portfolio management and may engage in securities lending up to 30% of assets. The ETF tracks the FTSE Asia Pacific ex Japan ESG Low Carbon Select Index, which is a subset of a broader index and applies ESG and exclusionary criteria. The replication method involves synthetic replication through derivatives (total return swaps), which introduces counterparty and collateral risks that are difficult for retail investors to understand. According to MiFID II Article 254 and Delegated Regulation EU 2017/565 Article 57, and ESMA guidelines, such use of derivatives integral to the investment objective and synthetic replication generally classify the ETF as complex. The ETF is a UCITS fund, which normally presumes non-complexity, but the presence of embedded derivatives and synthetic replication overrides this presumption. The ETF does not use significant leverage beyond UCITS limits, but the derivative exposure and synthetic replication method introduce complexity. The index tracked is transparent, but the structure and risks related to derivatives and counterparty risk reduce ease of understanding for retail investors with basic knowledge. Therefore, the ETF is classified as complex under MiFID II rules."
}