Investment policy 'cautious' amid volatility: Derayah Financial CEO

Local markets are still grappling with a state of volatility and weak performance, versus the relative momentum in global markets as recent economic changes take hold, said Derayah Financial’s CEO Mohammed AlShammasi.

In an interview with Argaam, AlShammasi indicated that the Saudi-listed company is cautiously optimistic about market performance going forward, especially as global markets begin to adapt to the new economic reality.

In Q1 2025, Derayah Financial delivered positive operational performance, despite ongoing challenges and volatility in financial markets, said the top executive, adding that assets under custody grew by more than 20% quarter-on-quarter to about SAR 36 billion by the end of the three-month period.

Derayah Financial’s assets under management (AUM), according to the CEO, rose by 5% to reach around SAR 18 billion in Q1 2025. However, the slight decline in the three-month profit was mainly attributed to a marginal drop in the investment portfolio and some non-cash accounting costs.

Among the first-quarter influencing factors is the absence of performance fees, which came as a natural result of the current market pullback that is expected to continue through the second quarter, AlShammasi pointed out.

“This is in addition to the recently-amended idle land fees regulation, which weighed on real estate funds, leading to a slowdown in the launch of some real estate products. Accordingly, the Saudi-listed company is adopting a cautious approach in this regard,” he underlined.

As for Derayah Financial’s brokerage activity, AlShammasi indicated that the local brokerage segment underperformed given the sluggish local markets, albeit global markets performed relatively better.

He added that investor sentiment remains highly sensitive to daily news and developments, which is reflected in the sharp volatility in trader behavior. However, the company has maintained strong performance and profitability in the brokerage segment.

Derayah Financial adopts a “cautious” investment policy, with most of the company's investments geared towards short-term Shariah-compliant financial

instruments, while the remainder is focused on Derayah-managed investment funds. Both streams were hit by recent capital market downturns, which put pressure on overall topline growth during the first quarter of this year, according to the CEO.

He also pointed to Derayah Financial’s promising strategic investments, most notably in D360 Bank. “The preliminary operating results for the bank are positive, having surpassed one million clients, despite the fact that the early years of establishment are often challenging in terms of costs and operational structure.”

Al-Shammasi also stressed that Derayah Financial is a strategic investor in D360 Bank and is currently in the process of obtaining regulatory approvals from the Saudi Central Bank (SAMA) to launch new banking products and services. He highlighted that a new savings product was recently rolled out, with more in the pipeline.

Meanwhile, joint teams from both sides are working on developing shared products and services, including savings and credit. This is in addition to operational collaboration in areas like cash custody and management.

In addition, the CEO touched on the importance of technology investment, infrastructure development, and excellence in delivering easy-access, competitively priced digital services.

He explained, “Derayah Financial launched several initiatives, including major updates to its digital app and the launch of a new robo-advisory investment platform, Derayah Smart, serving a broad segment of investors. The company is also working on multiple digital projects aimed at improving customer experience and developing new digital services.”

Moreover, since human capital is deemed a core asset for financial companies, Derayah Financial rolled out an employee stock ownership program (ESOP) during the first quarter of this year. 

The program, running through 2029, aims to attract distinguished talents and retain active employees. It is classified under non-cash costs, therefore does not represent actual cash outflows. The program bears fruit the most at its start and then its impact gradually fades over the following years, the top executive concluded.

According to data available with Argaam, Derayah Financial’s net profit amounted to SAR 106.2 million by the end of Q1 2025, a 22% slump from SAR 136.2 million in Q1 2024.