Paisley Nardini, Tema ETFs

Paisley Nardini is back on the show, and this time she is at Tema ETFs. She joined as Head of Investment Strategy at the start of September. She started in fixed income trading and portfolio management, then spent about a decade in multi-asset strategy roles, with time in liquid alternatives and derivative income. She told me she got the startup bug after more than ten years at large firms. At Tema she gets more say in how the firm grows, and she shares in the upside and the downside.

Tema was founded in 2022 and builds actively managed thematic funds. We talked about its newest one, a prediction markets fund that listed on Cboe on September 9.

Two Kinds of Prediction Market Fund

Paisley opened by separating two products that get lumped together. Several issuers have filed for funds that trade event contracts directly. Those are binary bets. If you are right, the fund goes up. If you are wrong, it can go to zero. None of those have launched yet. Tema's fund owns the businesses that run the markets: the exchanges, the brokers, and the crypto rails underneath them.

Her case for the theme starts with volume. She put monthly trading on these platforms at about $50 billion, roughly double where the year began. The 2024 election got it going. The World Cup this summer added to it. The launch date was no coincidence. It landed at the start of the NFL season, with the midterms right behind it.

I told her my own version of this. I opened an Interactive Brokers account to trade again, pulled up E-mini futures, and there was a prediction market sitting next to my chart. She said that is exactly it. Interactive Brokers is a holding because it puts event contracts inside the screen people already use. She also sees the market moving past sports. A hedge fund might want a trade around next month's CPI print. What started as a bet on a Dodgers game is turning institutional.

Kalshi and Polymarket Inside a Daily Liquid Fund

The part I wanted to understand was the private stakes. Kalshi and Polymarket are both private. The fund holds each at about 7.5% through a special purpose vehicle, so about 15% combined. The other 85% is listed stocks like Interactive Brokers, Coinbase, Intercontinental Exchange, Robinhood and Circle. As far as she knows, no other daily liquid ETF holds either company.

She compared the structure to a State Street fund that keeps about 15% in private credit. The cap is there so the fund stays liquid. She was also firm that these are long-term positions. Tema did the same thing with SpaceX in its space fund. People assumed it would sell after the listing. It is still one of the largest holdings. Her line was that if they loved it in March, they still love it today.

I asked how the private positions show up in NAV, since my read was that the fund bought them about 10 to 13% below the latest private valuations. Her answer was simple. The fund carries each stake at the price it paid, every day, until there is a new funding round or the company lists. She admitted that makes the price a bit stale and the daily moves smaller. With no new information, she thinks that price is the most accurate one available.

The Systematic Sandwich

I pushed on the 85%. Is a company in the fund because it is a good business, or only because it touches prediction markets? Paisley called Tema's process a systematic sandwich. A quantitative screen comes first and cuts the universe on valuation, quality, cash flow and durability. Then the team does bottom-up fundamental work to keep the portfolio pure to the theme. The fund is concentrated, so every name has to earn its seat. That covers the plumbing as much as the exchanges.

She was honest about crypto. Polymarket is crypto native and runs on a blockchain. Coinbase is a holding. She called the fund crypto adjacent, because that is where much of the technology was born, and said it would be silly to claim otherwise.

Where It Sits in a Portfolio

For an adviser who is purely passive, or who only uses factors, she thinks this is probably too spicy. It fits advisers who already run a thematic or sector rotation sleeve. She would not put 20 or 30% of a portfolio here. If a client has 5 to 10% of the total portfolio in themes, she sees the fund playing a role inside that sleeve. She also likes that it gives an adviser a story to tell clients every quarter.

How Tema Picks What to Launch

I closed by asking how Tema decides what to build next. She said some firms play a quantity game and some play a quality game. Tema is small, so it brings in outside research partners and new hires with deep experience. The latest is someone with a strong commodity background. She pointed to the many versions of vanilla ice cream already on the shelf. Her test is blunt. If Tema cannot add value through stock selection in a space, why would it come to market at all?

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