Paisley Nardini

Paisley Nardini grew up in rural Northern Minnesota with no Wall Street aspirations. An amazing program during her undergrad studies changed that trajectory, and she started her career as a short-term bond trader in San Francisco, waking up at 3:30 AM to catch the markets. After four years behind a Bloomberg screen, she moved to the client-facing side at PIMCO working with institutional clients like pensions, endowments, and sovereign wealth funds. She spent the last eight or nine years blending client-facing work with multi-asset portfolio management before landing at Simplify Asset Management as Vice President and Client Portfolio Strategist. She's also president of the CFA Society Orange County, where she's volunteered for eight years. Outside of work, she's into pickle ball (the first time she played against a woman in her 60s, she "got it handed to me").

On this episode of Behind the Ticker, recorded live at the Exchange ETF conference in Vegas, Paisley breaks down CTA, Simplify's Managed Futures ETF. The fund uses four distinct signals to drive active asset allocation across commodities, rates, and equities, and it's been delivering equity-like returns while staying anti-correlated to stocks.

Simplify's DNA

Simplify launched in 2020 on the back of SEC rule 18F-4, which provided clearer guidance around the use of derivatives in ETFs. The firm has grown to $7.1 billion in AUM across 35-plus ETFs in about four and a half years. Morningstar named them the second fastest growing ETF provider last year. The team is loaded with ex-PIMCO people, including portfolio managers who spent much of their careers next to Bill Gross. That PIMCO DNA shows up in their approach: structural alpha through derivatives, systematic repeatable return streams rather than big duration or credit bets.

Four Signals Working Together

CTA runs on four pillars: trend following at three different time horizons (short, medium, and long term), carry, mean reversion, and a risk-off inter-market signal. The fund rebalances daily, evaluating all four signals every single day. The signals counter-balance each other: if trend says go long gold but mean reversion says gold is extended, the position sizing gets dampened. The carry signal captures the cost or benefit of holding positions. And the risk-off model kicks in during equity drawdowns to shift the portfolio's posture.

Paisley explained a critical design choice: CTA was intentionally built to trade only commodities and interest rate futures, not equities or currencies. This was deliberate. They wanted to provide the most capital-efficient diversifier possible. If you're adding managed futures to a portfolio that already has equities, you don't want the managed futures fund also trading equities. That would reduce the diversification benefit. By focusing on commodities and rates, CTA provides the purest anti-correlation to equity portfolios.

Risk-Off in Real Time

Two recent examples showed the risk-off signal working. In mid-December, when the Fed pivoted more hawkish and equities sold off, CTA shifted to long bond positions in interest rate futures. This was notable because since inception, the fund had primarily held short interest rate futures due to negative carry in the rate environment. The signal overrode the carry input. Then in February, as commodities sold off alongside equities, the fund scaled out of almost all long commodity positions in about two weeks, went short commodities, and simultaneously went long the two-year and five-year in both Canadian and U.S. rates. "The positioning adjusted pretty dynamically," Paisley said.

The Case for Managed Futures

Going back roughly 25 years to when the SocGen managed futures index was first developed, managed futures have outperformed both stocks and bonds during every period of crisis: the tech bubble, the GFC, COVID, 2022. But the outperformance isn't limited to crisis periods. Over the full 25 years, managed futures have outperformed core bonds, providing better downside capture within a broader portfolio and smoothing overall returns.

Simplify's CTA has been particularly aggressive compared to peers. With fewer constraints and the ability to go all-in on trending markets, the fund has produced top-percentile returns. As of the recording, CTA had performed essentially in line with the S&P 500 since inception while being anti-correlated. "To provide equity-like returns in a market environment where it's been very attractive for the S&P 500 over the last three years and to do so while being anti-correlated, it kind of speaks for itself," Paisley said. The fund had already crossed $1 billion in AUM, validating the thesis with real advisor dollars.

Key Takeaways

• CTA uses four signals (trend at three time horizons, carry, mean reversion, and risk-off inter-market) rebalanced daily across commodities and interest rate futures only, no equities or currencies, for maximum diversification benefit.
• The fund has matched S&P 500 returns since inception while maintaining anti-correlation to equities. Over $1 billion in AUM in about four years.
• Managed futures have outperformed stocks and bonds during every major crisis over the past 25 years: tech bubble, GFC, COVID, and 2022.
• The risk-off signal triggered in both mid-December and February, dynamically shifting from short to long rates and from long to short commodities within days.
• Simplify manages over $7.1 billion across 35+ ETFs. The firm is loaded with ex-PIMCO talent, including PMs who worked alongside Bill Gross.

Listen to the full conversation on Spotify, Apple Podcasts, or YouTube.