Startup of the Week: Saudi fintech joins battle for US retail investors

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.

His Quant Alpha platform offers artificial intelligence-powered software for investors, which he told Arab News: “Adds a layer of simplicity, reliability and academic rigor to investment strategies”.

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

Quant Alpha, which employs five full-time staff and 30 freelancers, is aimed at investors in US stocks and is focused on small-cap investments — firms with a market capitalization between $300 million (SR1.1 billion) and $2 billion. 

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

“In the future, we have plans to build a system for the Tadawul as well as 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 he expects sales of over $1 million in the financial year to 2022. Quant Alpha aims for rapid growth, targeting over $13 million of income from 50,000 subscribers at the end of its third year.

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The US retail investor market is seeing firms offer zero, or low, trading fees for small traders. California-based small investor platform Robinhood has grown rapidly since its 2013 launch to around 13 million users, while Virginia-based E-Trade has about 5.5 million retail and corporate accounts. These firms also offer some trading advice.

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

He gained a bachelor’s and a master’s degree in electrical engineering at Pennsylvania State University, before joining Saudi government-financed construction startup Istidama. That led to a three-month project in China, where he was part of a team that successfully converted farm waste into fertilizer and animal feed. 

Soon after that Bakhsh found himself with time on his hands back in the Kingdom during the COVID-19 lockdown. Fascinated by the stock market, he began developing his own investment and trading strategies. 

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

“One of them said: ‘All these online investment software platforms charge a hefty amount, they don’t work, and they’re not backed by any academic research. They are a complete rip-off. What if you started leasing your software?’ That got the ball rolling.”

Baksh said that his platform, which he funded himself, is backed by a great deal of data.

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

“We have what’s called a ‘multifactor portfolio’, based on four key factors — momentum, value, quality and size — all which are rigorously researched by the academic community.”

Baksh has published his 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 cyclic behavior of a portfolio. The difference between investors who actually make money, and ones who lose, are those who understand their portfolio and are willing to be patient during times of underperformance.”

Bakhsh noted that similar to his own experience, the pandemic lockdown triggered a huge interest in the stock markets from small investors in the US who could not go to work.

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Around 15 percent of American retail investors began trading in 2020, according to a survey in April by US financial services giant Charles Schwab, which owns E-Trade.

However, many seasoned market observers say that a significant proportion of the trading by these new investors is led by anonymous tips on trading message boards, which can lead to wild stock price swings 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 out and not sticking with them for the long-term.”

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

Bakhsh added: “I’m definitely excited by this huge flood of new investors. I hope I get a chance to educate a lot of them. I’m doing my part and hopefully it will work out for us and our clients.”

Source: Arab News