Greenhaven Road: The Future Of Interactive Brokers
Who We Are
- A long-biased hedge fund.
- Concentrated and patient.
- Pursue both quality companies (compounders) and special situations (spinoffs, rights offerings, SPAC, etc.)
Operating Background of Portfolio Manager
- Managed a manufacturing business after graduating college.
- Co-Founder of Acelero Learning. Several roles including CFO, CTO, Chief Strategy Officer, and currently board member. Acelero has grown from three co-founders in a tiny office to1,100+ employees in 15 states.
- A touch of traditional-Worked in private equity, a long/short fund, Stanford MBA.
What I Believe
- Fundamentals matter,balance sheets matter, cash-flow matters, management matters, and incentives matter.
- An investment committee of one is the perfect size – the aspiration is to be a small boutique manager.
Performance History Throughout Life Of Strategy
Strategy and fund have outperformed relevant indices.
- The Company’s Words: Interactive Brokers “Provides trading solutions for institutions and investors”. They are the largest on-line broker by trade volume.
- Glass Half-Empty View: Limited float,volatile earnings, and expensive.
- My View: Highest margin, lowest cost broker with a very long runway ahead of it and secular tail-winds behind it.
The Past And The Future
The Roots are in Market Making
- 1977: Thomas Peterffy, the Chairman of the Interactive Brokers Group, buys a seat on the American Stock Exchange (AMEX) and becomes a member, trading as an individual market maker in equity options.
- 1982: Timber HillInc. is formed. Initially, the company trades equity options at the AMEX, clearing through Spear, Leeds & Kellogg. Traders receive telephone instructions identifying pairs and prices.
- 1993: Interactive Brokers Inc. (now known as IB LLC) is incorporated as a U.S.broker-dealer, making Timber Hill's vast intercontinental electronic network and trade execution services available to customers.
The Future is Brokerage
- 1999: IB begins to clear online trades for customers trading stocks and equity derivatives through the IB system.
- 2005: IB is ranked the #1 software based broker, and #1 for lowest trade cost by Barron's.
- 2011: Interactive Brokers becomes the largest online U.S.broker as measured by Daily Average Revenue Trades reported.
- 2013: IB's Hedge Fund Capital Introduction ramps up with 60% of funds receiving at least one investment and the funds reporting an average 2013 rate of return of 20%.*
The Future Of Interactive Brokers
“I'm obsessed with trying to grow this to become the largest brokerage in the world. That's the only thing I care about.” -Thomas Peterffy, CEO Interactive Brokers, Q1 2016 Earnings Call
Healthy, Growing, and Profitable
- Largest US Electronic Broker: As measured by revenue trades
- Industry Leader: Was recognized by Barron’s for 6 straight years as the #1 electronic broker
- Global Reach: Access to 100+ markets in 24 countries
- Consistent 15% + Customer Account Growth: The company has consistently grown accounts for the past several of years. Brokerage is the future.
- Scalable and Efficient: $1.1M net revenue/employee
See full slides below.