Saudi fintech joins the battle for US retail investors

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RIYADH: Saudi entrepreneur Nezar Bakhsh has joined the battle for US retail investors after launching a financial technology startup that sells stock trading advice to traders.

Its Quant Alpha platform offers investors AI-based software, which he told Arab News: “It adds a level of simplicity, reliability and academic rigor to investment strategies.”

The Jeddah-based firm, launched in March 2020, provides research-based information that private investors can use to make long-term investments.

Quant Alpha, which employs five full-time employees and 30 freelancers, caters to U.S. equity investors and focuses on small-cap investments, companies with a market capitalization of between $ 300 million (SR1.1 billion) and $ 2 billion.

Bakhsh, 27, added: “We cater to high net worth customers in the US, UK, Germany and Switzerland who tend to be tech savvy investors who understand and appreciate our software.

“In the future, we plan to build a system for the Tadawul, the Shanghai market and the London Stock Exchange.”

The fintech firm, which does not act as a fund manager or broker, has 500 current subscribers and Bakhsh said it expects sales of over $ 1 million in the financial year to 2022. Quant Alpha aims for rapid growth, aiming for more than $ 13 million in revenue from 50,000 enrolled at the end of the third year.

It is against stiff competition in the US retail investor market, where companies offer zero or low trading fees for small traders. The California-based Robinhood small investor platform has grown rapidly since its launch in 2013 to approximately 13 million users, while Virginia-based E-Trade has approximately 5.5 million retail and corporate accounts. These companies also offer some business advice.

Bakhsh, 27, came to finance after an early start in science and engineering.

He earned a bachelor’s and master’s degrees in electrical engineering from Pennsylvania State University, before joining the Saudi government-funded construction startup Istidama. This led to a three-month project in China, where he was part of a team that successfully converted agricultural waste into fertilizer and animal feed.

Soon after, Bakhsh found himself with time in the Kingdom during the COVID-19 blockade. Fascinated by the stock market, he began to develop his own investment and trading strategies.

Bakhsh said: “My results have started to show great promise. And a couple of friends also started seeing profits using my strategies.

“One of them said: ‘All of these online investment software platforms charge a lot, don’t work and aren’t backed up by any academic research. I’m a complete rip off. What if you start renting your software? ‘ This got my balls spinning. “

Baksh said his platform, which he funded himself, is backed by a large amount of data.

He said: “Our member base has access to all of our research, some proprietary indicators and our best-performing portfolio, which is powered by our AI algorithms.”

“We have what is called a ‘multifactor portfolio’, based on four key factors – momentum, value, quality and size – all rigorously sought after by the academic community.”

Baksh has published its trading strategies as an e-book, available exclusively to Quant Alpha subscribers.

He said: “Informed investors are the best clients to have because they understand the cyclical behavior of a portfolio. The difference between investors who really make money and those who lose are those who understand their portfolio and are willing to be patient during periods of underperformance ”.

Bakhsh noted that, similar to his experience, the freezing of the pandemic sparked tremendous interest in equity markets from small investors in the United States who couldn’t get to work.

About 15% of US retail investors started trading in 2020, according to a survey conducted in April by US financial services giant Charles Schwab, owner of E-Trade.

However, many seasoned market watchers say that a significant portion of these new investors’ trading is driven by anonymous tips on trading forums, which can lead to wild swings in the stock prices of companies that come across their radar.

Bakhsh said: “Unfortunately, I don’t see many private investors doing extensive research. They just keep trying things and don’t stick to them in the long run. “

But this rush of new investors presents an opportunity for the Saudi platform.

Bakhsh added: “I am very excited about this huge wave of new investors. I hope to have a chance to educate many of them. I’m doing my part and I hope it works for us and for our customers. “

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