Business challenge story
With a multitude of factorsto consider and many options available, deciding how and where to invest your money can quickly become complex and inefficient. Nobody wants to lose their hard-earned cash getting caught out by a bad investment decision, so doing your research and choosing the right assets to match your constraints is essential, but this can often be difficult and time-consuming.
Dr. Hillel Raz, Chief Scientist at fixed-income algo-advisory services provider BondIT, elaborates: “The fixed-income market encompasses millions of assets worldwide, each of which has numerous parameters, some of which change constantly. To further complicate matters, all of these assets and the variables impacting them are interconnected, creating a multi-dimensional, convoluted landscape.
“Every investor has different requirements for their portfolios. For instance, some investors may be willing to take on a significant amount of risk, while others focus more on the yield they could make relatively safely over a number of years. To find the right investment, investors seek out help to navigate the complexities of this multi-dimensional framework.”
In the past, people had to turn to the assistance of a financial advisor and wait days for the advisor to come up with investment ideas.
To accelerate and customize the construction of fixed-income portfolios and optimize its fixed-income asset-management services, BondIT set out to find a more reliable, higher-performing optimization solver that would support real-time dynamics and better address static market constraints.
Finding the solution
BondIT evaluated several offerings before selecting IBM® ILOG® CPLEX® Optimization Studio to take its fixed-income portfolio services to the next level.
Dr. Eyal Kenig, Senior Algorithm Researcher at BondIT, comments: “We put various algorithms to the test to see how well different solutions could solve problems and ILOG CPLEX Optimization Studio consistently produced the best results, while offering high performance, speed and reliability. We were also attracted to the fact that IBM could provide a broad network of support.
“By harnessing the ILOG CPLEX Optimization Studio tool within our framework, our platform can find the optimal solution within the constraints,” says Hillel Raz, "providing the closest fit for any set of portfolio requirements.
Getting the solution up and running was a collaborative process, and the rich online resources that IBM offers were a great help.”
In addition to this technological match, IBM offered to enlist the support of the Israel Innovation Authority (then the Office of the Chief Scientist) to help finance the technological aspect of this R&D endeavor.
For this purpose, Israel Innovation Authority implemented its Global Enterprise R&D Collaboration Framework, in which IBM is a member. The Authority evaluated myriad aspects of the collaboration project to ascertain its feasibility, including the selected technology; the synergy with IBM; and the market potential. Consequently, the project was awarded a grant equal to 40% of the total R&D budget, whereas IBM contributed same value of in-kind assistance.
By deploying ILOG CPLEX Optimization Studio, BondIT equipped itself with a lightning-fast solution to support the creation of customized portfolios in seconds—leading advisory services into the machine-learning era and breaking the mold of the fixed-income market.
“The main advantage of the IBM technology for us as a startup was fast time-to-market, as well as its ability to handle many different types of variables and objectives, control numerous parameters, and handle infeasible problems,” said Amit Godel, CTO, BondIT.
“With the help of a powerful, accurate, and flexible solution, advisors can conduct a more thorough portfolio selection process and help their clients make wiser financial decisions,” notes Dr. Hillel Raz. “Advisors can determine, quickly and easily, whether fixed-income portfolios are within their sought-after constraints and make sound decisions based on this knowledge. Overall, our solution framework coupled with the IBM solver reduces the risk of investments by close to 30 percent for similar yields, compared to other solvers tested.”
Dr. Hillel Raz concludes: “Thanks to IBM technology, we can deliver portfolios tailored to meet the specific needs of each investor in minutes rather than weeks—empowering people to make faster, better informed investment decisions.”
Founded in 2012, BondIT is a fixed-income advisory services provider in Israel, and employs around 35 people. The company provides a platform that constructs efficient smart fixed-income portfolios and drives sales by empowering investment managers and advisors with personalized, data-driven investment recommendations. The company has developed an algo-advisory solution that helps to construct tailored, intelligent portfolios for customers, with on-demand, timely and comprehensive reports