Marc X. LoPresti, Esq. is managing director of The Strategic Funds, co-founder of The Strategic Group; founder of LoPresti Law Group, P.C., co-founder of BattleFin Group; LLC and IDI Group, and is a recognized authority on alternative investments. With 20+ years of practice as a securities attorney in New York, Marc has structured and launched numerous alternative asset management ventures He also oversees the Firm’s family office consulting practice, which provides advice about alternative allocations to ultra-high-net-worth families both in the United States and abroad.
Russ Alan Prince: With the investment landscape constantly changing, how do you look at data as a commodity, and what does that mean for the future?
Marc LoPresti: The investment strategies that we at The Strategic Funds pursue are intended to offer access to streams of alpha that you cannot get from traditional investment products. That means we must think outside the box to create products and investment strategies that are not readily available; oftentimes we blend new investment themes and concepts with traditional ones. The idea of data emerging as a commodity is a great example of that. Data is everywhere. We are creating data at such an unprecedented rate that a new word was coined: the zettabyte. Almost everything in our lives involves the creation and storage of data—apps on our smartphones, internet-connected devices from our cars to our refrigerators to our coffee pots. They're all collecting data on our behaviors as consumers. That data is being voraciously consumed, not only by corporations to better understand how to market to consumers, but by money managers, particularly hedge fund managers, who use data to anticipate the performance of corporations. It has become so prolific that data has, in our eyes, become a commodity, not only in terms of the generation and consumption of data but also in the handling, management, storage, and securitization of that data. With the advent of spectrum and 5G, there is a guaranteed explosion of IoT, or the Internet of things, as we become more and more connected. All that data needs to be transmitted, stored, managed, and handled. Therefore, a major theme of our Commodity Fund is the concept of data as a commodity.
If data continues to explode at a rate we’ve never seen before—and I guarantee you that it will—investing in companies that help manage, store, transmit, securitize, and consume data would be a wise investment. That's part of what we've done in the Commodity Fund.
Think of things like chip makers, data storage companies, spectrum participants on the telecom side, and companies doing data storage. That's the thesis behind data as a commodity, and we are also using data to help make better investment decisions. It’s also important to note that these are equity plays—another interesting variation on a commodity fund where investors can have exposure to names that fulfill this thesis of data as a commodity through equity investments which have some advantages over traditional commodity instruments.
Prince: Strategic Funds just launched the Strategic Commodity Fund. Tell us about the new fund and why investors should be excited about it.
LoPresti: Our Strategic Commodity Fund is one of the first of its kind. We have traditional commodity exposure in the fund because we believe traditional commodity prices will continue in a bullish pattern for the foreseeable future. We had those beliefs even prior to Russia’s invasion of Ukraine, where we saw a significant—and in some instances, unprecedented—price action for things like natural gas and fertilizer components.
The Russia-Ukraine situation only exacerbated the supply-demand balance for a lot of those energy commodities like natural gas, oil, and coal, as well as on the agricultural side with fertilizer components like wheat and corn. We have those traditional commodities combined with Commodity 2.0 themes, with data being the best expression of that. This unique combination holds the promise of delivering some attractive and uncorrelated alpha for our investors.
Prince: How does cryptocurrency play a role in the future of investing and what should advisors tell their clients about how to navigate this emerging landscape?
LoPresti: Cryptocurrency is here to stay. You can’t ignore it because it's not going anywhere. But it is important to understand that all cryptos are not created equal. There is Bitcoin in one category all to itself and then there is everything else, and I mean that quite literally. Unfortunately, people talk about Bitcoin and crypto and sort of blend it all together. That is a mistake.
Bitcoin is of course the leading cryptocurrency. It has been designated by the U.S. government and many other foreign government regulators as a currency, whereas the vast majority of other cryptos are still undesignated. It is unique because there will only ever be 21 million Bitcoin, and as we know from finance, one thing that remains true throughout the years is that assets tend to gather their value through their scarcity, particularly assets in demand. As the use case for Bitcoin continues to accelerate, institutional adoption continues to accelerate. As demand grows, scarcity increases and prices go up. All cryptos are highly volatile assets. One day it will exceed $250,000 per Bitcoin.
With the exception of the meme coins, everything else in the crypto world is a use case story—protocols being utilized in Web3, decentralized finance, and the metaverse ecosystem. We are talking about protocols like Ethereum, Solana, Avalanche, Hedera, Luna, and others. These are cryptocurrencies that are being used to power transactions in the decentralized world.
Decentralized finance is the concept of the disintermediation of traditional banking and financial infrastructure to allow our direct peer-to-peer financial transactions without having to pay banks, credit card companies, and all the other intermediaries who add little value to the process and add friction and delay for the settlement of a transaction. Ethereum is the most popular right now because it powers the ecosystem of NFTs—non-fungible tokens.
I encourage financial advisors to tell their clients to absolutely have exposure to crypto, and that exposure should be overweight Bitcoin because of its regulatory certainty and its scarcity. These are, however, alternative assets and risk assets. On average, if 10% of an individual’s portfolio is in risk assets, crypto should be 1%. In other words, 10% of the 10%.
Advisors would be well-advised to ensure their clients are invested not just in Bitcoin crypto and the cryptocurrencies themselves, but the companies that are at the forefront of Web 3.0 and decentralized finance. Fortunes will be made as we move toward a Web3 in a DeFi world, and it is absolutely coming!
Russ Alan Prince is the executive director of Private Wealth magazine and one of the leading authorities in the private wealth industry. He consults with family offices, the wealthy, fast-tracking entrepreneurs, and select professionals. Connect with him on LinkedIn.com.