Intercontinental Exchange Inc

Intercontinental Exchange (ICE) operates leading financial exchanges and clearing houses, as well as provides data and software to its customers. Founder and CEO Jeff Sprecher has long characterized ICE’s overarching strategy as 'bringing transparency, efficiency, and standardization to markets with a mission to digitize the analog'. We believe ICE should continue to grow revenue and profits at an attractive clip over time and could even see the rate improve if AI trading strategies proliferate, ICE expands into new markets, and the mortgage market picks up after a multiyear slumber. ICE is currently priced at a decade low valuation as investors are concerned about the potential impact of artificial intelligence technologies. We believe this sentiment is misplaced, as ICE’s exchanges could actually benefit from AI trading strategies, and its data and software are regulatory-compliant, largely proprietary, and deeply embedded in customer workflows.

We recently established an investment in Intercontinental Exchange, a business we have followed for nearly a decade. ICE is a leading global exchange operator with a highly moated Exchanges segment generating nearly 70% of earnings, anchored by a crown-jewel energy franchise with revenues more than two-and-a-half times those of its next-largest competitor. Over the last five years, Exchanges grew revenue 8% and profits 10% annually, with margins expanding to 75%. Despite exceptional earnings growth, ICE shares fell 21% in the year before our purchase, driven by concerns over AI's impact and competition. We believe these concerns will not impair ICE’s earnings power or intrinsic value.

Intercontinental Exchange (ICE) has shown strong financial performance, with first quarter revenues significantly higher than in 2025, and an operating margin that has also improved. The relationship between rising revenue and expanding operating margins is evident in the full-year 2025 results, which reflect a 6% revenue expansion and a 33% after-tax net profit margin, leading to a double-digit per-share earnings growth rate. This low incremental cost for rising transaction volume indicates a robust business model, with a 14% increase in per-share earnings matching the 20-year annualized increase of 15%. Overall, ICE appears to be a strong and growing business.

Intercontinental Exchange (ICE) was our largest detractor during the quarter, declining 21.7%. Despite strong underlying performance with revenue and earnings increasing 20% and 34%, respectively, concerns about a cyclical peak in earnings led to a decline in shares. Additionally, fears surrounding a new product, 'perpetual futures', which could threaten traditional derivatives exchanges, have contributed to investor anxiety. We believe these concerns are overblown, particularly for ICE's flagship energy markets, but the market's reaction has been negative, prompting us to reduce our position.

Intercontinental Exchange (ICE) has faced a significant decline of 21.7% despite strong underlying performance, with revenue and earnings increasing by 20% and 34%, respectively. The drop in share price is attributed to concerns over a cyclical peak in earnings and competition from new products like 'perpetual futures.' These concerns are viewed as overblown, particularly for ICE's core energy markets, which rely on features that perpetual futures do not prioritize. However, the overall sentiment suggests caution as the market reacts to these cyclical pressures.

Intercontinental Exchange (ICE) is a high-quality business that we see trading at a compelling valuation. Despite some market concerns regarding AI's impact on its proprietary data and analytics, we believe these issues are peripheral and unlikely to materially affect ICE. The company's core franchises are well positioned for a range of legal, regulatory, and commercial reasons. We modestly added to the ICE position at a price well below our assessment of fair value, indicating our confidence in its long-term prospects.

We believe Intercontinental Exchange (ICE) continues to offer a wide array of diverse services that are not reflected in its stock price. The underlying trading and clearing services provided by ICE are essential in both up and down markets, providing a heightened level of revenue and earnings visibility. While there are competitive threats from new products like perpetual futures, we see ICE's established position and service offerings as a strong moat that supports our conviction in its long-term value.

Intercontinental Exchange (ICE) is a high-quality business that is not particularly AI-sensitive and that we see trading at a compelling valuation. ICE is trading on a forward price to earnings ratio of around 17x, a level we have not seen since the GFC. We view ICE’s core franchises as well positioned for a range of legal, regulatory and commercial reasons. We modestly added to the ICE position at a price well below our assessment of fair value, indicating our belief in its strong long-term potential.

Intercontinental Exchange demonstrated strong performance with a return of +23.9%, contributing positively to the Fund's overall results. This outperformance highlights the resilience and growth potential within the financial services sector, particularly in the context of ongoing market dynamics. The Fund's strategy continues to benefit from such high-performing stocks, reinforcing the belief in the company's robust fundamentals and its ability to generate significant returns.

Intercontinental Exchange (ICE) faced challenges due to broad concerns about AI disruption affecting parts of its business, alongside a decline in exchange energy volumes as geopolitical tensions eased. The approval of perpetual futures for bitcoins and potential additional asset classes may not be sufficient to offset these headwinds. The combination of these factors has led us to reassess our position in ICE, resulting in a decision to reduce our exposure.