Derayah Financial: We have transformed to become the largest independent broker in Saudi Arabia, and the size of our AuM grew by 45% in H1 2024

Derayah Financial's CEO, Mohammed AlShammasi

Derayah Financial's CEO, Mohammed AlShammasi, said the company successfully evolved into a technology-led provider of brokerage as well as asset and wealth management solutions, developing innovative solutions to meet customer needs.

In an interview with Argaam, AlShammasi added that the company's assets under management (AuM) and under custody (AuC) exceeded SAR 40 billion by the end of H1 2024, a 22% increase compared to the end of 2023. Noting that AuM stood at SAR 15.1 billion, which is over 45% higher compared with the end of 2023.

The CEO indicated that Derayah has approximately 14% market share in internet trading volume within Saudi Arabia’s main and parallel financial markets, which is a significant increase form the 5% share we had just six years ago, in 2018.

The company's brokerage platforms offer access to 43 local, regional, and international markets, and provide clients with access to a variety of financial instruments, including equities, fixed income, and derivatives.
 
Digital transformation helped position Derayah as a leader in technology-driven investment solutions, which led to the growth of its brokerage business into the third largest in the Kingdom, with a 12-fold increase in client accounts from 2016 to 2023. The CEO also added that CVOID-19 was in part a catalyst for this digital transformation and was a transformational period for the company.
 
Here are details of the interview:

Q) What is Derayah today, and what role does it play in enhancing the attractiveness of the Saudi capital market?

A: Derayah has come a long way since its establishment in 2009 and is widely recognized today as Saudi Arabia’s leading independent digital investment platform. It makes me incredibly proud to factually say that Derayah has successfully evolved into a technology-led provider of brokerage and asset & wealth management solutions. What has always driven us has been the fundamental aspiration to simplify the process of investing, making wealth creation accessible to all, rather than exclusively institutional or high net worth investors, who we are also proud to count as clients. The key point though is around investor inclusivity.

Our two main business segments are brokerage and asset & wealth management. Our brokerage platforms offer access to 43 local, regional, and international markets, and provide clients with access to a variety of financial instruments, including equities, fixed income, and derivatives. We also have a fast-growing asset & wealth management platform which manages over SAR 15.1 billion AUM (as of 1H24), and has offerings in both public and private markets. Public market offerings include equities, fixed income, discretionary portfolio management (DPM), and cash management, while private market funds focus on real estate, credit, and venture capital.

We choose to take a very innovative and customer-centric approach to building our offerings and generally scaling the company. Doing so has positioned us at the forefront of the wave of transformation impacting the financial services sector and is further supported by Saudi Arabia’s Financial Sector Development Program, a key component of Vision 2030. This translates into constantly having our ears to the market and the various regulatory reforms to act quickly in structuring new products and investment opportunities that we believe our clients can benefit from. As one of the first financial services companies in Saudi Arabia to offer a global online trading platform open to retail investors and now the third-largest digital brokerage in the Kingdom, we’ve had some great wins for both Derayah and the further enrichment of the Kingdom's financial services sector.

Q) What are the most significant strategic decisions that have positively impacted the company’s growth trajectory over the past 15 years?

A: Over the past 15 years, we’ve made several strategic decisions that have been instrumental in shaping our growth trajectory. From the outset, we focused on significantly advancing our digital capabilities, becoming the first brokerage in Saudi Arabia to operate with purpose-built technology. This commitment to innovation allowed us to introduce industry-first offerings, such as a fully digitalized user journey and Saudi Arabia’s first robo-advisory service. Such steps have helped position us as a leader in technology-driven investment solutions, which led to the growth of our brokerage business into the third largest in the Kingdom, with a 12-fold increase in client accounts from 2016 to 2023.

Needless to say, COVID was a game changer for us because it pretty much forced the world as we knew it to become digital-first for an extended period of time. As a digital-first investment platform and given the excitement of investors, especially retail investors, about public markets at the time, we realized we would have to strike while the iron was hot and scaled our business significantly with excellent results.

Other significant milestones include the launch of our asset management business in 2011 and the introduction of alternative investments in 2016, allowing us to further expand our product offerings with a focus on both public and private markets, and a commitment to delivering strong, risk-adjusted returns. We’ve also prioritized product diversification and expansion. Whether it’s the launch of Derayah REIT, private credit funds, or equity portfolio management services, we’ve consistently sought to broaden our product portfolio to meet the evolving needs of our clients. At the same time, we have sought to be innovative in our product offerings. For example, our innovation in margin lending products and funding sources a variety of lending products and eventually launching the first private credit fund I the Kingdom supported by margin lending.

At the heart of all this is our proprietary technology, which is developed in-house by a team where 30% of our workforce is dedicated to IT. This gives us the agility to innovate and scale quickly and deliver exceptional digital experiences.

Our efforts haven’t gone unnoticed. We’ve been recognized for our reliability, innovation, and customer-centric approach, which has driven a 12-fold increase in client accounts since 2016—nearly all through online acquisition. These achievements underscore our strategy of leveraging technology and market insight to stay ahead, and they have positioned us as a clear leader in the brokerage and asset management space

Q) What was the size of Derayah’s AuM at the end of the third quarter of 2024? And what is the growth rate compared to the previous year?

A: As of June 2024, our assets under management (AuM) stood at SAR 15.1 billion, which is over 45% higher than it was the year prior and reflects a 33% AUM CAGR since 2020.

This growth is attributed to our clear strategy and focus on expanding our product offerings in the public and private markets in Saudi Arabia to include investment products and high-margin asset classes. These diverse products, along with easy registration and competitive investment returns, have gained significant traction among our clients. This strategy has contributed to achieving significant growth in the company’s public funds, including equities (private investment portfolios and public equities), debt instruments, and money markets, which amounted to SAR 9.8 billion by June 2024, achieving a compound annual growth rate of nearly (80%) since 2020, driven by strong growth in private investment portfolios and public equities funds

For example, our Derayah Freestyle Fund, achieved a remarkable 51.5% return in 2023, significantly outperforming the benchmark ’s 20.2%, with cumulative returns of 347% since its March 2016 inception compared to 174% for the benchmark.

The private markets segment also experienced considerable growth, with assets reaching SAR 5.3 billion as of June 2024, demonstrating our strength in alternative investments such as credit funds and real estate funds.

Q) What is your estimated market share in terms of trading volumes in the main and parallel markets in Saudi Arabia? And how much has this share grown compared to the previous year?

A: As of June 2024, we have approximately 14% market share in internet trading volume within Saudi Arabia’s main and parallel financial markets, which is a significant increase form the 5% share we had just six years ago, in 2018. This is a testament to our strategic focus on innovation, customer experience, and market leadership.

I am immensely proud of the growth that we’ve been able to achieve, and thanks to our clients and the incredible efforts of the entire team at Derayah, we are now the number one independent digital broker and the third largest CMI in KSA in terms of online brokerage market share. Our ability to provide seamless access to 43 markets, across a variety of asset classes including equities, fixed income, derivatives, among others, has been a key factor in this growth. Moreover, our focus on ensuring a best-in-class user experience through our platform, combined with advanced trading tools and efficient execution speeds, has positioned us as a preferred choice for both retail and institutional investors.

We also continue our commitment to innovation and developing solutions to enhance our leading role in the financial technology sector in the Kingdom. We do this through strategic partnerships with local and international entities, the latest of which was the strategic partnership we signed with Alpaca, where we aim to provide advanced trading solutions to investors in local and international financial markets and to enable trading in the Saudi financial market to a wide segment of foreign investors, as well as retail and institutional investors, in a smooth and fully digital manner.

Q) What are your plans to expand Derayah’s services in the financial brokerage and asset management sector? What economic activities will Derayah Financial focus on to boost its investment growth over the coming year?

A: Our expansion plans focus on enhancing our brokerage and asset management services while developing new solutions to cater to emerging client needs. In terms of local brokerage, we aim to refine our product offerings by pioneering first-to-market innovations such as new derivatives, single-option products, and expanded Shariaa’ compliant margin lending solutions. We also plan to enhance our competitive pricing strategies, as seen with Derayah Global Lite, which offers zero-commission trading on equities in the U.S. market. Growing our retail client base will continue to be a priority for Derayah and so we will work hard to continuously enhance the end-to-end experience for onboarding new clients, provide top notch customer support, and aggressively market the proposition. 

We are also focused on strengthening our institutional brokerage business by catering to regional and international investors interested in Saudi and GCC stocks. This includes establishing a dedicated institutional trading team and leveraging the Post Trade Technology Program to expand lendable assets in the Kingdom, unlocking growth potential in the Securities Borrowing and Lending (SBL) market. Furthermore, we plan to introduce algorithmic trading capabilities to automate high-speed transactions, allowing for optimized execution and capitalizing on market opportunities. And building on the success of Derayah Smart, we aim to relaunch the robo advisory platform with a brand-new app, website, and growth marketing campaign.

In asset management, we are focused on real estate, credit, and private equity, while continuing to develop public market funds with superior performance. We plan to tap into the increasing demand for alternative investments by offering innovative fund strategies tailored to different risk-reward profiles.

To support these initiatives, we are investing heavily in our team’s digital capabilities, including data analytics and AI-powered tools, to enhance the experience for our users and ensure that we’re continuously improving our operational efficiency.

Q) What role do you expect D360 to play in supporting digital transformation initiatives in banking services, and how does this align with Derayah’s vision for the future?

A: We can all see how digital transformation is revolutionizing the way we live our lives, interact with each other, and access everyday services. Banking is becoming an almost entirely digital experience, and many of us probably can’t remember the last time we had to visit a branch in person. We view D360 as the future of banking, and the reality is that the future is now. It is a digital native bank that aspires to reinvent finance through innovation and technology, making it convenient, accessible and fair to all.

Our decision to incubate and invest in D360 through a 20% stake is not just because we see great synergies between Derayah and D360, but more importantly because we have a shared vision to make finance accessible for all - this is very much what inspires and differentiates us, and we see great alignment and a common purpose between the two entities.

Given that one of our strategic pillars is to focus on client acquisition, retention, and personalized support, leveraging digital capabilities and data analytics, we believe strategic investments, like those in D360, will help create a virtuous cycle of growth and long-term customer loyalty.