SAN SEBASTIÁN, SPAIN and MENLO PARK, Calif., October 7, 2022 — Researchers from Multiverse Computinga global leader in providing value-based quantum computing solutions, and Protivitia global consulting firm, work with Allied Financiala leader in the digital financial services industry, published a study demonstrating how a new algorithm running on a quantum annealing system (a technology for finding optimal solutions) can automatically optimize investment portfolios with returns matching traditional portfolios .
The joint team of quantum computing engineers and financial analysts has developed a hybrid quantum-classical approach to financial index tracking portfolios that maximizes returns and minimizes risk. The article on the study, titled “Financial Index Tracking via Quantum Computing with Cardinality Constraints” can be found here.
“Together, we have innovated by delivering a quantum solution to a portfolio optimization problem that remains challenging for classical computers. As the performance of quantum hardware improves, there will be more and more opportunities to deliver even better returns with less market risk,” said Sathish Muthukrishnan, Chief Information, Data and Digital Officer at Ally Financial. uses that benefit our customers and help Ally see around corners.”
Leveraging previous classical-quantum hybrid approaches, the researchers constructed investment portfolios for Nasdaq 100 and S&P 500 companies and used daily returns over a year.
The team then used the algorithm to construct investment portfolios that can generate the same financial returns as traditional portfolios with much smaller groups of stocks. Replicating financial indices using a limited subset of assets, called cardinality constraints, has always been an extremely difficult challenge. The number of stocks in the team’s Nasdaq 100 fund was four times smaller than traditional portfolios and 10 times smaller in the S&P 500 fund.
The research team also built an improved tracking portfolio as part of the project, which showed that quantum constructed portfolios significantly outperformed the target index’s risk profile by up to 2x.
“Financial managers can use the algorithm today to meet specific investment goals or other personalized client requirements,” said Mehdi Bozzo-Rey, chief revenue officer at Multiverse Computing. “Once the hardware achieves the quantum advantage, we will be able to solve this problem instantly and solve it exactly.”
“For example, this new algorithm can be used to manage ETF funds, reducing overhead costs for money managers while helping to keep fees low for clients,” according to Konstantinos Karagiannis, director of Protiviti. Quantum Computing Services. “This is a major step forward that puts Ally Financial at the forefront of quantum computing research in the financial industry.”
Sam Palmer, head of financial engineering at Multiverse Computing, co-authored the research paper with Karagiannis and Adam Florence, director of data science at Ally Financial.
Protivity (www.protiviti.com) is a global consulting firm that offers deep expertise, objective insights, a tailored approach and unparalleled collaboration to help leaders face the future with confidence. Protiviti and its independent and local member firms provide their clients with advisory and management solutions in the areas of finance, technology, operations, data, digital, legal, governance, risk and internal audit through its network of more than 85 offices in more than 25 countries.
Appointed to the 2022 Fortune 100 Best Companies to Work For list, Protiviti has served more than 80% of Fortune 100 companies and nearly 80% of Fortune 500 companies. The company also works with smaller and growing companies, including those looking to go public, as well only with government agencies. Protiviti is a wholly owned subsidiary of Robert Half (NYSE: RHI). Founded in 1948, Robert Half is a member of the S&P 500 Index.
About Multiverse Computing
Multiverse Computing is a leading quantum software company that applies quantum and quantum-inspired solutions to solve complex problems to create value today and enable a more resilient and prosperous economy. The company’s expertise in quantum algorithms and quantum-inspired algorithms enables it to achieve optimal results from current quantum devices as well as high-performance classical computers. Its flagship product, Singularity, enables professionals in all industries to harness quantum computing with common software tools. The company serves companies in the finance, mobility, energy, life sciences and advanced manufacturing industries.
Source: Multiverse Computing