Magic Markets #204: Blockchain Technology in Financial Markets (with AnBro and Mesh.trade)

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Full transcript:

The Finance Ghost: Welcome to episode 204 of Magic Markets. It’s a truly international show this week. It always is because Moe is up in Canada and I’m down here in Cape Town, although he’s coming back to South Africa for a visit soon, so that’s quite exciting. But our guests today are all the way in Europe, so it really is a properly international show. And we won’t be talking about geopolitics or where people are in the world. We will instead be talking about how blockchain can change the game for traditional finance markets, so that’s going to be super interesting, not least of all because I’m not very clued up when it comes to the world of crypto and blockchain. Moe, I’m not sure how much of a “crypto bro” you are, but I guess we’re about to find out.

I’ll introduce our guests first and then I’ll say hi to Moe. One of them is well known to you as a Magic Markets listener, and that is Justine Brophy of AnBro. You would have heard a lot of AnBro’s stuff before on Magic Markets. The guest today who will be new to you potentially is Connie Bloem. Connie is the co-founder and managing director of Mesh.trade – it’s going to be very, very interesting to just dig into how blockchain works in your world. So let me say hello to Moe first. Moe, it’s going to be a fun, fun show about crypto today.

 

Mohammed Nalla: Indeed, Ghost. A very fun show. And I think what we’re trying to really achieve here is when we talk crypto, some people are what I would call crypto native. They understand the ecosystem, they understand this new fintech world, but a lot of our listeners are not – a lot of our listeners are still quite entrenched in the traditional finance and capital markets model. So what I would really like to achieve from the show today is to kind of explore what that synthesis looks like between the traditional capital markets. That’s where we’ve again spoken to players like AnBro many, many times, now welcoming Connie on the show because I think that’s really where the flywheel comes about. Crypto is really gathering a lot of momentum, certainly with what we’ve seen in the US for example, the incoming administration is very positive towards crypto, and I guess this is just the way of the future.

It’s high time that a lot of people educate themselves, ourselves included as well, in terms of what role does – we call it crypto, it’s bigger than crypto – it’s crypto, it’s blockchain, there’s a lot of stuff to unpack here – but just how does that plug into the traditional markets as we know it? I’m not going to take anything away from today’s discussion. I think it’s a great intro. It’s a fantastic and fascinating opportunity to speak to Connie Bloem from Mesh and Justine Brophy from AnBro. So, Justine, Connie, welcome to Magic Markets.

 

Justine Brophy: Thanks very much for having us, guys. It’s great to be on and speak to your audience. And to have Connie with us is fantastic.

 

Connie Bloem: Always awesome to be able to speak about not only crypto, but also the blockchain technology – sitting behind that and marrying that with the world of traditional finance that I think you are very used to speaking about.

 

The Finance Ghost: Yeah, Connie, I wanted to say I really enjoyed the ad that you guys have on YouTube, that padel court advert with the Wolf of Web 3.0. I had a proper laugh at that. So that was very, very good. Just some really cool branding around what you’re building. Very typical of a startup, I guess. But lots of startups get it wrong. I must say, I do enjoy the way that you guys have done what you’ve done. So well done to you on that.

There is this overall theme around everything you’re busy with, which is this concept of opening up the capital markets to everyone, basically. And I think a good place to start with this podcast will be to just understand how you think blockchain technology helps with that. How does it reduce friction in the way that financial markets work? Why does it solve this problem and what do you think the problem actually is?

 

Connie Bloem: I think that’s such a brilliant question because we see so often that when people bring technology to the forefront, they say, for example: “AI for something.” And then, what does it actually mean? AI for walking your dog, who cares? How’s it going to make it more efficient and better? I think for a very long time, blockchain technology and crypto assets as example, had a bad rep because a lot of people just said, we use blockchain. And this was this magical wrapper, be all and end all of the world.

Now, when we looked at this problem statement, when we looked at capital markets in general, that is our area of expertise, we didn’t say: “Blockchain is the answer. What is your question again?”

We actually looked at a capital market structure that was disparate, not transparent, very onerous, and actually exclusionary for the people that it was fundamentally built for. We believe that the capital market should be easy to access, simple to use, and transparent. And what technology would actually enable that mission statement for us? Blockchain was the answer to that mission statement. And that’s why we started using it in basically the very fundamental setup of our company and our platform.

But what does that actually mean for our end-client? What does it mean for investors coming into our space and for entrepreneurs coming into our space? While we aim to directly connect issuers of assets such as Justine with their investors into those assets, why should we become a party to their trade? Why should we become anything other than the connecting platform, the glue, the mesh that brings them together? And that is basically the problem statement that we try to solve and are solving, and also why we started to use blockchain technology.

 

Mohammed Nalla: Connie, I’m going to jump in here because to take a little bit of a step back, because some of our listeners might not be familiar with the differences between when we’re talking blockchain or when we’re talking crypto assets. A fundamental question that would come up when we look at a platform such as yourselves, because again, mesh.trade is very much a platform-as-a-service in terms of my understanding. So the question that begs is: how is this not an exchange? We often talk about tokenisation of assets. You are really marrying, I guess, the asset issuer to the investors on the other side. But how does tokenisation of an asset, for example, differ from something being called a security? I think these are fundamental questions that a lot of investors that are familiar with conventional capital markets might actually ask is, how is this not an exchange? What is tokenisation really? And how do crypto assets and blockchain, how do those terms actually fit in into the ecosystem? I think that is probably fundamental to any other discussion we’re having today because it will really assist with people understanding the overall ecosystem and then being able to put the picture together in terms of how these pieces fit.

 

Connie Bloem: I think that’s a wonderful fundamental step to take. And let me break that down into maybe the components that you just asked about, because I think you really hit the heart of the heart here to say, okay, we have something called blockchain, which is the technology base. In my world, we would call that our infrastructure, but it’s very simple to understand as a ledger.

I make little entries into it and say Justine owns 10 AnBro assets. And then the actual thing that represents those 10 assets are called tokens. I would have 10 tokens. The 10 tokens are very simple, 10 units of something. It’s also important to understand that the blockchain is but a component to this market. It is the transactional ability. It’s the thing on which we create the 10 tokens, the 10 units of something.

But then on top of that, we still need to put down the platform as well. And Moe, you alluded to this, you use the terms exchanges, platform-as-a-service here. But what is a platform, fundamentally? A platform can be something like a marketplace where we meet each other. It’s no different from a flea market that you go to over the weekend where you scratch around a bit in old pots and pans and find something that you like. It’s a square, someone put down a table and they put 10 cups on it. It’s no different from AnBro coming into Mesh, putting down a table and putting their 10 assets down that Justine just owned.

Now, we start layering some of the complexities on top of this. Again, you mentioned the term a security, but what is a security? A security is fundamentally a financial asset, a financial asset that’s most probably listed on something called an exchange. But exchange has always been a marketplace. We’ve changed that term from being a marketplace to a regulatory term that we all know as, let’s say for example, the Johannesburg Stock Exchange or the London Stock Exchange.

But since when do they have the only right to operate a marketplace where people can meet each other, where you can buy and sell things? By that definition, we should most probably also call certain eCommerce platforms an exchange, but we don’t, do we? No, we keep this term especially for securities.

Now, looking at the capital markets, we all know that the capital markets are complex. There’s a lot of things going on here. There are so many more flows happening in this market than the things that we just see on the exchange. And I remember as a young analyst sitting in the banks, looking at some of these big deals and cool things that people do and wishing, yes, I wish I could invest into Apple. That’s the dream that we’re trying to bring forth here, is bringing back that marketplace, bringing that place where people come and they can list their assets and still meet their investors directly within a regulatory gambit, still within honouring all the regulations, but making that more open, more simple to use, and more transparent for more people to interact with.

 

The Finance Ghost: I maybe want to touch on that regulatory point because of course, the function of an exchange is a couple of things, right? So the one thing they do is they regulate the things listed on the exchange and the other thing they do is facilitate trade. Now, if I understand correctly, and please do correct me if I’m wrong, I think Mesh is very much a trade facilitation type solution, right? It’s about helping assets land where they need to go via blockchain technology. So for example, you don’t have an exchange licence right now. You’re not looking to regulate the companies that are on there. You can’t come and do your primary listing on there and say, hey, I’m regulated by Mesh. It’s rather to say, oh, I’m a private company, I have a prospectus, it’s registered with CIPC. I’m going to raise money from the public. I just happen to be using Mesh’s technology to be able to do it. Or Justine, in your case at AnBro, these are regulated registered funds. But Mesh is just another way to reach investors. Right?

 

Connie Bloem: I do agree with some of your explanation there. And I like how you divided into there’s a regulatory component and then there’s a trade components.

Within that trade component, there’s three parts. It’s the issuance or the creation of the assets. There’s a trade of the asset and then there’s the management of the assets. So let’s say, for example, Justine’s dynamic compounding asset did not just compound dynamically, but actually paid out the interest component. That management of that lifecycle event, that settlement of interest, is also part of this ecosystem. But what we’ve done with Mesh is we’ve seen those three components: issuance, trade and management, and said we can do that in one platform, we can do that in one place. So Justine can actually list his assets and manage it through its full life cycle.

And you are very correct in showcasing that there is a regulatory component to this as well. So in the case of an exchange, yes, your exchange is also your regulator. But in the case of a Mesh, which is a marketplace, there are already other regulators in the market. So when you come out and you want to raise capital for your company because nothing actually stops you in the market from raising capital off-exchange. If you are a private company, you can privately raise capital and you can do that through Mesh. If you are a public company, but you’re public unlisted, you can register a prospectus and you can raise capital on Mesh. This is already consolidated within the South African regulations because we have the Companies Act, we have the FMA, we have the FAIS Acts, we have all these regulations on regulations on regulations with regulatory bodies already set up, that Mesh does not have to be a regulator as well. We just want to be a platform, we just want to be the venue where everyone meets and trades.

 

Mohammed Nalla: I think that makes a lot of sense because it’s somewhat strange in South Africa we’ve got an exchange that also acts as a regulator, you don’t see that in a lot of markets internationally. In the US you’ve got the regulator, which is quite distinct from a number of exchanges that do exist. I think the important point, Connie, that I want to latch on, that you mentioned as well, is that Mesh really comes in to facilitate this flow of capital between investors and issuers on the other side. And again, this is not necessarily limited just to equities. I know, for example, you look at bond issuances as well. So it’s a really nice ecosystem. It’s a multi-asset class ecosystem which becomes very powerful for the end-user, for the investor. Some of the stuff you mentioned as well as what I’ve just mentioned now almost pre-empts the question that I want to pose to Justin. But I want to bring Justin from AnBro back into the conversation here because he has been sitting very quietly and I want him to actually jump in…

 

The Finance Ghost: Justine, I’m hoping he’s still awake there though. We’re going to find out shortly. I’m sure he is…

 

Mohammed Nalla: We’ll find. We’ll find out.

 

Justine Brophy: I’m still here!

 

The Finance Ghost: There he is. There he is.

 

Mohammed Nalla: Justine, we’ve spoken to AnBro a number of times. AnBro is definitely no stranger to our listeners. Obviously what Connie’s put on the table sounds very exciting, but what was the impetus from AnBro’s perspective in terms of partnering with Mesh? What are the advantages that you’re seeing for potential investors? Is it really broadening the subset of investors that AnBro is able to tackle? Is it really just facilitating an easy way to trade for people that already exist within the mesh ecosystem? What were some of the hooks that made this partnership so appealing for Anbro, certainly with regards to your particular service offering?

 

Justine Brophy: So there are a lot of questions in there and I think to start answering them, the first part was as follows: AnBro has always tried to provide the easiest access to our investors. Those investors come from different backgrounds. Some of them, if they’re institutional, they’re going to want to buy something off a stock exchange or a more unitised position or perhaps even a discretionary mandate.

What we started to see was a lot of the online brokerages and where we come from, even listeners of this show have been in touch with us to say look, I’m struggling to find this asset, I’m not sure where this asset is. Then we’ll have to sort of go between and try and find the relevant people at those online brokerage pieces and how that works.

The reality for us was we appreciate being available on those platforms, but that’s what we were – we were available on the platform. You are one of many different assets and almost as if you were looking for it on the JSE, you are now looking for it on our online platform. When we looked at our business, when we wanted to make products available, like I said, we started off with people who had stockbroking portfolios and wanted to buy the more exchange traded versions. Then we were approached by a lot of financial advisors. We were interested in more the unitized old school mutual fund unit trust in a South African context, top product and those went through LISPs.

As we’ve gone down the road, one of our fundamental principles is to try and keep our product as transparent and honest from a cost perspective to the end investor. Now a big point I want to make here before we jump into the Mesh piece is: when you buy AnBro’s product, say you buy the Unicorn portfolio and you buy the mutual fund or unit trust, you’re buying one unit of the portfolio. When you buy the stock or the stock exchange, you’re buying a stock which represents that portfolio. When we move and we look at Mesh, an individual’s buying a stablecoin in the same way: it’s one unit of the underlying portfolio, to Connie’s point earlier about the cups on the table.

Now the difference we have found is that when you look at this platform, a modern platform that’s out there and why they appeal to us is, even the process, the simple process of going through seeing what the asset is, the definition of the asset on the platform, it’s ease to find and ease to trade and set up your account, is just so much more advanced than what you’ve seen so far.

So for example, one of the cases I’d like to put in place is an investor from this podcast phoned Craig and I and had a discussion about struggling to actually buy the asset on one of South Africa’s online platforms. They couldn’t even find the actual asset on the platform where it was. Now I can promise you, from that all the way through to how do I open an account to try to get someone to come back to me, this is a far more transparent, simple way to actually start investing. It also appeals – I think there’s a generation of investors now, well obviously we see it a lot in the UK and Europe and it’ll be prevalent in the US, that are moving to investing straight off their phone. You know, the majority of us sitting in our generation work off a laptop or a desktop and trade. There’s a lot of people who want technology that you can hold in your hand and you can do – Mesh is available on your laptop, but it’s something that’s also moved the needle and you can invest straight off your phone. You can get the information you want quickly.

So for us, the platform represented a different approach for investors moving to stablecoin referencing, much like the same as an exchange traded fund or the unit trust, a stablecoin referencing the portfolio but again it was a step forward in terms of investor transparency and access to those particular portfolios.

 

The Finance Ghost: That makes a lot of sense. I mean, honestly, I’ve had the same struggle before actually with some of these brokerage accounts and finding the AnBro products and others as well. So that actually makes a lot of sense. It genuinely does.

I guess Connie, from your side, the way the guys at AnBro think would also resonate really well with you from a just forward-thinking tech perspective. We know them well and we know what’s in the portfolio. And I think, before we close off this podcast, we’ll give the floor back to Justine to just remind the listeners of what’s actually in these portfolios just at a very high level. But I think just culturally in terms of the way they think and the forward-thinking nature of everything, this would be quite a good partnership for you as well, I would imagine?

 

Connie Bloem: Absolutely. We have two kind of models that we run within our business. We have clients coming directly to Mesh and we list their assets and we help them raise capital. And then there’s people that we partner with and with AnBro, we’ve partnered with them. When we look at partnering with someone, we actually have two components within our business that we consider. We look at whether the person or the business that we’re partnering with is something called a magnetic node. Are they connected in the market? Are they dynamic? Are they talking to people? Do they “mesh” with a lot of people? To misuse my own company’s name!

But the second one is, are they the best at what they do? And not only are they the best at what they do, but are they also a bit of the square pegs in the round holes? Are they trying to change the market? Are they trying to be the mavericks of the market? And that’s definitely what we see within the two people that we have in this business.

So in both Justine and in Craig, they go and they try to do the best for their fund. Their analysis is something to write financial engineering books about, but also the way that they understand their investor base and truly what do you as an investor want and what you want to invest into. We see a lot of funds and fund managers not really truly being fund managers anymore. Why are there 20 S&P500 tracker assets? I don’t understand what differentiates the one from the other. But in AnBro, we see a company that has gone and structured three incredible products that understand what is going on in the market and what the clients really want. Justine was telling me a story earlier around just their BRNDZ asset, where you can’t find that in a fund. Yes, you can maybe trade the individual stocks if you can find the tickers on your favourite non-Mesh platform, but you can’t actually find a basket like that anywhere else in the world. And that is very unique for us and something that we strive to partner with closer.

 

Mohammed Nalla: I think that’s so refreshing, Connie, because quite often in the industry we see what is termed asset-gatherers. They go out there, they just gather lots of assets. It’s index-investing, just at a very expensive fee at the end of the day. And AnBro’s not that. I think our listeners are familiar with that. We’ve unpacked the BRNDZ portfolio on this show and if you’re a recent listener, go and check out our library on the website. You can go and search for that. We did a lot of detailed work on the brand’s portfolio. There’s also the Unicorn, the name’s not just a fancy thing there. At the time of its launch, it was really something quite unconventional, a high growth portfolio there. Then Dynamic Compound, Justine, which I believe is the more conservative type of income orientated portfolio, if memory serves. We’ve covered all of those on Magic Markets. So again, if you’ve missed that, go and check out those previous shows.

But I just want to circle all the way back again because like we say, there are asset-gatherers, AnBro’s not an asset-gatherer, they’ve got some differential thinking. So, Justine, maybe you can come in and just outline very quickly, I’ve kind of touched on what those portfolios look like. I know those now sit on the Mesh ecosystem. But another point that I think is important, either Justine or Connie, either one of you can address this, is just what are the costs of investing through the Mesh platform versus some of the other ways in which investors would conventionally access AnBro?

 

Justine Brophy: That’s a great question. I think a lot of your listeners are probably sitting there going, right, what does it cost? And I think the important thing is, and why we were keen to partner with Mesh, is whether you go to AnBro and you go via the mutual fund or the AMC or the stablecoin now on Mesh, you are still paying the same underlying fee on the actual portfolio. The portfolio is no different. That was very important to us. We’ve tried to make sure that investors always have a transparent look-through to what it costs. And the important thing for us is regardless of where you are buying this portfolio, you are getting it at the same fee. And I think, fundamentally when we chatted to Mesh and we spoke about the partnership, this was the most important part, because what we always wanted, coming from this as investors ourselves, cost is such an important thing. You need to know what it costs. I think this is a transparent way of looking at and expanding it to a different potential universe of investors as well.

 

Connie Bloem: The only thing that I can add to what Justine said there is it’s very important for us that clients can find it at the best price as well on Mesh. You will see the price that these assets do trade on Mesh, we haven’t even spread that price either. We’re not trying to be market makers in this asset, so it’s as near to exchange as what you can possibly get. Our platform trading fees are extremely competitive as well. Given that we have technology that transacts a lot cheaper than what traditional technology can do, we can actually provide it at extremely competitive rates to our clients. So this means that whether you’re buying small or whether you’re buying big, the R10 clients versus the R10 billion clients, you will all be treated the same and you will all have the transparency of cost associated with that as well.

For us as a platform, we do not try to get to our clients’ funds in every way and means. What you see is what you get. It’s all written on the box.

 

Mohammed Nalla: That’s true democratisation of finance. Ghost, I see you want to jump in there, but the last point that Justine I just wanted to touch on is all three of those AnBro portfolios are now available on Mesh, correct?

 

Justine Brophy: That’s correct.

 

Mohammed Nalla: And where can investors go and find Mesh? Connie, maybe just give us a pointer in terms of your website, are you also very prevalent on social media? How can our listeners engage directly with you? That’s something we’ve always put on the table with AnBro. The team is very accessible and a lot of our listeners have directly reached out to the AnBro team and asked their questions. Can we expect the same from the Mesh team as well? And how can people find you and reach out to you directly?

 

Connie Bloem: Absolutely. To find our platform, you go to https://www.mesh.trade/, you click on either the login or the sign up button and you go through a very short and efficient process to register yourself and invest there. But if you would like to reach out to the team and contact us, it’s very simple to reach us at help@meshtrade.co or if you can’t find us via the email and email is not your preferred channel, on our website we also have our support channel listed and there’s also a WhatsApp line that you can reach us. If you start your conversation out with hey, I would just like to hear a bit more about AnBro, the team will be talking to you personally. So at any time, the team can be reached and we will be very willing to have a lovely and long chat to you, otherwise we’ll refer you back to Justine.

 

The Finance Ghost: Yeah, he will be very happy to have an even lovelier and longer chat with you, no doubt, because Justine is very passionate about what they do. I think just to recap it, it’s the Unicorn Global Equity portfolio and that’s sort of the high-growth, relatively higher-risk play. You’ve got the biggest brands portfolio, that’s BRNDZ, because if you include a vowel in your name, then it’s not a forward-thinking portfolio, hey Justine?

 

Justine Brophy: Absolutely.

 

The Finance Ghost: And finally the Dynamic Compound portfolio, which has vowels in it, so then you know it’s lower-risk. That’s always the right test. That’s your slightly more old-school companies that are really doing the hard work for you, allocating capital, compounding it over time.

So it really is a full product suite that has been put together. It’s all available on Mesh. And I think from our side, it’s just great to see that the availability of the funds is improving over time. It’s becoming easier to find them. And I think, Connie, what you’re doing is great. You’re making it easier for people to find investment opportunities, embracing new technology. If there are ways to make it easier for people to invest, then I think Moe and I will always be strongly in favour of anything that achieves that, really.

Plus you got Craig from AnBro to do some pretty epic AI imagery, which I’m sure we’ll tease him about on social media at some point in time when he’s ready for it. Connie, Justine, I just wanted to say thank you for joining us this week. Any passing comments, maybe, Justine, from your side actually, just around this exciting world. It seems like you’ve been very focused now on making the portfolios available to more people. Is that more of what we can expect from you going forward or are you cooking up some new portfolios as well that we’ll be hearing about soon?

 

Justine Brophy: Look, I think it’s a bit of both. I think we’re super excited about partnering with Mesh and also being able to just deliver it to investors. I think we’ve always had to be on the back foot with platforms. You speak about your fund, people get excited and then they just get disappointed because they go somewhere and they can’t get to where you need to be. We’re super excited to be partnered with a very progressive platform where you can move in and see our stuff and be part of it and it’s really efficient to execute, so that’s exciting.

We do have some exciting things coming down the road. I would also say to investors, go to mesh.trade and have a look even beyond AnBro, there are some very interesting investable instruments that might just surprise you in terms of what instruments are also available on Mesh and we’re quite excited to work with them. Some of our future stuff will definitely be sitting on Mesh first.

 

Mohammed Nalla: Indeed. Justine, Connie, thanks. Unfortunately that’s where we’ve got to leave it. I had a look around on the Mesh website. Some of those multi-asset approaches, there’s some fixed income stuff on there that’s exciting for me. I love any platform that allows you more than just a single asset class view. I think that’s going to be of interest to our listeners.

Unfortunately that’s where we’ve got to leave it. We will put links to both AnBro and Mesh in the transcript on our website. If you’re just listening to the podcast, go and check that out. What we won’t put on there is Craig’s AI generated picture. We will leave that for a later time. I know we were all chuckling at that. Justine, Connie, thank you so much for what has been a very insightful conversation and hopefully the first of many. I think there’s just so much to unpack in this space. So yeah, we certainly will be watching closely.

For our listeners, you can find us on X, it’s @magicmarketspod, @mohammednalla and @financeghost. Or go and find us on LinkedIn. Pop us a note on there. We hope you’ve enjoyed this. Until next week, same time, same place. Thanks and cheers.

This podcast is for informational purposes only and is not financial or investment advice. Please speak to your personal financial advisor.