Exclusive: First Islamic robo-adviser to launch in Mena

Cash boost from Dubai's Beco Capital to help Wahed Invest move US team to the UAE

Robo-advisors like Betterment and Wahed Invest offer automated money management solutions for a fraction of the cost of traditional financial services companies. Silvia Razgova / The National)

One of the world’s first Sharia-compliant “robo advisers” plans to start operations in the UAE in the next fortnight, as it looks to a US$2 million funding boost this week from the Dubai venture capital firm Beco Capital.

New York digitally automated investment adviser Wahed Invest launched in the US five months ago following a two-year incubation. Its chief executive Junaid Wahedna said the company was in the process of moving its senior management to a new office in Dubai it hopes will become the company’s new global headquarters.

Wahed Invest seeks to capitalise on pent-up demand for Islamic investment services among low to middle-income investors across the Middle East and North Africa (Mena). Subject to local approvals, the US securities and exchange commission (SEC) regulated company expects to start regional operations by mid-Nov­ember, focusing initially on the UAE.

The news is a coup for this country, which is striving to become a global hub for the financial technology, or fintech sector, which is seen as a key driver of economic growth.

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Financial free zones across the Emirates, including Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), have published fintech regulatory frameworks and developed strategies to lure fintech start-ups and related businesses to the UAE.

Robo-advisers offer automated, low-cost, investment and wealth management services via digital platforms. The industry is relatively nascent and exists predominantly in the US and Canada, where Betterment – the biggest robo-adviser with an estimated $10 billion of assets under management – and Wealthfront are the best-known examples. Others include Schwab, Vanguard and TradeKing.

Global assets under management by robo-advisors are expected to grow by 68 per cent annually to $2.2 trillion by 2020, according to a 2015 report by consultancy AT ­Kearney, and the industry is set to transform the investment management business – and wider banking industry – with its low-fees, low-overheads model.

Wahed Invest claims to be the world’s first Islamic robo-adviser in operation at present. The Malaysia private wealth management firm Farringdon Group said in June it would launch a Sharia-compliant robo-adviser, Algebra, later this year, but there is no such outfit in the Mena region.

“Our target for ethical, Sharia robo-advisory is the younger demographic, 25-35 years old, digitally savvy and educated millennials,” said Mr Wahedna.

“So when you look at the figures, the Mena region is one of the best places to be – especially when you look at the growth rates of internet penetration, it’s absolutely perfect for us and we’re going where nobody has gone before.”

Unlike conventional wealth managers, which require clients to have a minimum saving of $100,000 or more, Wahed Invest asks for a minimum of just $100 to enable it to tap into a broader customer base.

Mr Wahedna said he believed the company could grow much larger through operating in Mena. “There are 3 million Muslims in the US; in the Mena region there are 400 million, so you can see the scale of growth possible.

“The numbers in the US are bigger because they are higher income clients, so the average account size [in Mena] will be smaller. However, the total numbers should more than make up for that,” he said.

He said that, three months after launching in the US, ­Wahed Invest had already secured 1,000 clients, the same as Betterment and Wealth Front had acheived within a year. Wahed Invest plans to have 20 people in Dubai within the next month, six of whom are from its US management team, including Mr Wahedna and the company’s chief technology officer.

The VC firm Beco Capital will this week announce the $2m funding injection in Wahed Invest, in addition to Wahed’s latest $5m Series A fundraising round. Wahed also had an initial $2m seed funding for launch.

“This is a very large series A ticket for us – not the biggest we’ve ever made, but a sizeable cheque,” said Dany Farha, the chief executive and managing partner of Beco.

“We did this because it’s a Sharia-compliant robo-advisory. There’s nothing like this in the world.”