Interactive Brokers Group Inc - Class A

Interactive Brokers (IBKR) has quickly become a top performer after being added during the market volatility of last year. We continue to benefit from their highly scalable, low-cost platform and an automated, engineering-driven approach to the brokerage industry. This positions IBKR favorably in a competitive landscape, allowing it to capture market share effectively and maintain strong margins.

Our position in Interactive Brokers Group, Inc. class A common stock (NASDAQ: IBKR) made a notable positive contribution to our portfolio, gaining 4.3% for the quarter. Even after trimming our position early in the quarter at prices notably higher than where IBKR ended, it still represents a mid-teens percentage of the portfolio’s value. This reflects our confidence in the company's growth potential and its strong performance relative to the market.

Interactive Brokers Group, Inc. is a compounder investment that Hinde Group has held since inception, delivering a 26.8% compound annual return over more than a decade. In 2025, IBKR delivered stellar operating results with total customer accounts and customer equity growing 32% and 37%, respectively. Despite headwinds from monetary policy easing, adjusted EPS grew 24.4%. The company is poised for strong performance, with expected earnings growth at least at a mid-teens annual rate, and aims to pay a dividend yield of 0.5% to 1.0%. IBKR's intrinsic value is rapidly growing, and as market concerns fade, its stock price should reflect this growth.

Interactive Brokers has been a significant beneficiary of the long-term democratization of financial markets, evidenced by a compound growth rate of 29.9% per annum in account numbers since 2016. This growth has been fueled by increased retail participation and the internationalization of its services, allowing global clients access to US equities. The manager believes that the structural changes in the market, including the rise in retail investor activity and options trading, will continue to support Interactive Brokers' growth trajectory despite potential cyclical peaks in trading volumes.

Leading online brokerage house Interactive Brokers Group, Inc. contributed to performance, driven by strong quarterly results and a rebound in equity markets. The quarter began with considerable turbulence following President Trump's announcement of sweeping tariffs, which initially triggered recession fears. However, as the quarter progressed, many of these tariffs were either paused or rolled back, leading to a sharp market rebound. This recovery supported robust business momentum at Interactive Brokers, with continued growth in client accounts and assets under management, elevated trading volumes, and a rebound in margin balances. We continue to own the stock due to its long-term earnings potential and its consistent 30%-plus account growth rate.

Interactive Brokers is a highly automated global securities firm that specializes in routing orders and processing trades in securities, futures, foreign exchange instruments, bonds and mutual funds on more than 150 electronic exchanges and market centers around the world. The company has no material, direct exposure to any tariffs on goods, and its revenues mainly come from commissions and net interest income, which are not directly affected by tariffs. IB's business is diversified across customers, customer segments, geographies, products, product types, and market centers, providing resilience against adverse economic conditions. The company has a high profit margin and has demonstrated consistent pre-tax income growth.

We exited our position in Interactive Brokers (IBKR) to preserve capital and raise cash for more prospective opportunities, notwithstanding the longer-term quality of the business. IBKR earns a majority of its revenue from net interest income on idle client cash and margin loans. US recession odds and Fed rate cut expectations jumped following the much worse than expected 'reciprocal' tariff rates. A sharp market selloff and even more extreme sentiment reversal would trigger margin calls and reduce demand for margin loans. We now expect negative EPS growth for IBKR this year, while 2026 will depend on whether the US enters a recession or not.

Interactive Brokers is a highly automated global securities firm that specializes in routing orders and processing trades in various financial instruments. The company has no material, direct exposure to tariffs, and its revenues mainly come from commissions and net interest income, which are not directly affected by tariffs. Interactive Brokers is insulated from adverse impacts due to its global revenue and expense structure, high profit margins, and diversified business model. The company has demonstrated resilience through past financial crises, with pre-tax income growth from 2006 through 2011 and from 2019 to 2023.

Our position in Interactive Brokers Group, Inc. Class A common stock (NASDAQ: IBKR) was a significant contributor to our portfolio's performance, gaining 19.9% during the quarter. This strong performance, alongside our other holdings, reflects our confidence in the company's growth potential and its ability to capitalize on the current market dynamics. The overall economic recovery and increased trading activity among retail investors further bolster our positive outlook for IBKR.