Quantum computing will redefine how financial institutions approach portfolio optimisation to enable faster and smarter investment decision-making.
Investment portfolios today are more complex than ever, often comprising hundreds or thousands of assets. The challenge lies in finding the ideal mix of assets to maximise returns for a given risk level—a problem that grows exponentially with portfolio size. Traditional algorithms, while effective for smaller or less complex portfolios, rely on simplifications and heuristics that can miss the true optimal solution when the problem scales.
Quantum computing introduces a radical new approach. With its ability to evaluate vast numbers of portfolio configurations simultaneously, quantum can uncover better investment strategies in a fraction of the time, fundamentally transforming portfolio management.
How Quantum Changes the Game
Portfolio optimisation is a classic combinatorial problem. As the number of assets increases, the number of possible allocations grows exponentially, quickly overwhelming classical computers. For example, a portfolio of 100 assets presents an astronomical number of possible combinations, making brute-force optimisation infeasible. Quantum computers, however, are uniquely suited to tackle such complexity. By encoding the portfolio problem into quantum bits (qubits) and applying quantum algorithms like the Quantum Approximate Optimisation Algorithm (QAOA), quantum systems can search for optimal allocations across the entire solution space.
Unlike conventional algorithms that may get stuck in local optima or require days to run, quantum algorithms traverse the solution space more efficiently. Real-world pilots have demonstrated this potential. Spain’s BBVA bank, for instance, ran a proof-of-concept using quantum techniques on a 52-asset portfolio over an eight-year period. The quantum approach found the optimal trading trajectory in seconds compared to two days using traditional methods.
Quantum optimisation isn’t just about speed but also accuracy and coverage. Classical algorithms often stop when they find a “good enough” solution, but quantum algorithms can leverage phenomena like superposition and entanglement to explore many potential solutions in parallel. This increases the chance of identifying the true global optimum—the very best outcome, not just a decent one. In practical terms, this could mean portfolios with a few extra basis points of return or a bit less risk, which can be extremely valuable in competitive markets.
Momentum in the Industry
Financial institutions are taking notice. Several banks and asset managers have launched experiments and partnerships to explore quantum computing in portfolio management. HSBC is actively exploring quantum computing and recently conducted an experiment to improve bond trading predictions by 34%. JPMorgan Chase has invested in developing quantum algorithms for asset pricing and optimisation, giving them an edge in forecasting and risk-adjusted returns. As quantum hardware improves, the benefits will increase exponentially.
A Pragmatic Roadmap for Leaders
The prudent step for financial institutions is to start building familiarity and capability now so they are best placed to leverage the quantum advantage.
Phase 1: Foundation – Engage early through small pilot projects to understand quantum models and how to formulate business problems for quantum solvers. Build foundational knowledge and talent in this phase. At Wipro, we are actively engaging with leading banks and financial institutions in our innovation labs to co-innovate quantum-powered portfolio optimization solutions, deploying them on quantum infrastructure provided by AWS Braket, IBM Quantum and other hyperscalers providing QCaaS (Quantum Computing as a Service).
Phase 2: Experimentation & Integration – Scale experimentation and integrate quantum techniques into existing investment workflows. Expand pilot scope to include related applications such as risk modelling, asset pricing, and liquidity optimization. By combining deep domain expertise in financial services with advanced quantum capabilities, we help clients to:
- Identify high-complexity portfolio optimisation challenges
- Translate complex investment problems into quantum-solvable models
- Design and execute pilot programmes that demonstrate measurable business value
Phase 3: Quantum Advantage & Industry Leadership – Over the next three to five years, quantum optimisers are expected to tackle larger and more realistic portfolios as hardware improves. Specialised hedge funds or asset managers could achieve quantum advantage in highly complex portfolios.
Quantum finance represents the next frontier in portfolio optimisation, where computational power meets strategic intelligence. While classical computing will continue to play a vital role, quantum technology is set to become the differentiator that redefines performance benchmarks and competitive advantage. Early movers are already translating pilot results into measurable performance gains.
The quantum era of finance has begun and now is the time to explore, experiment, and lead.
