Like preloved clothes, Zalando is getting a new home. Kinnevik plans to spin off its stake in the German online retailer, distributing its remaining 21 per cent stake worth €5.5bn to shareholders. Timely. Zalando is the Swedish investment group’s largest holding by far. It has had a bumper year as the pandemic pushed shoppers online. Investors can now decide for themselves whether to retain the fashion retailer in their portfolios while Kinnevik forges a new path for future growth.

Zalando will leave a big hole to plug. Kinnevik’s decade-long relationship with Zalando has generated almost a nine-times return on its initial investment. That has given Europe’s largest listed tech investor the experience and capital to springboard into an eclectic mix of public and private tech investments. Those looking for venture capital-style exposure in a listed entity could do far worse than the consumer, healthcare and food investments that remain.

At the core of the group’s post-Zalando strategy remains its holding in Tele2. The telecoms group set up by Kinnevik founding family member Jan Stenbeck is a cash cow: dividends are used for growth capital and new investment. Group net cash stood at SKr4.7bn ($560m) at the end of last year, accounting for almost 7 per cent of assets post the Zalando sale.

Chart shows net asset value (Skr bn) showing Kinnevik’s changing portfolio

That buffer is prudent during turbulent economic times. But much of last year’s 85 per cent total shareholder return comes from the continual upward re-rating of listed investments. Zalando, which is profitable, trades at more than 110 times two-year forward earnings, up a fifth just from the year end. Shares in German-listed retailer Global Fashion Group, 40 per cent held by Kinnevik, rose fivefold in 2020. Equity income from its holdings have lifted Kinnevik’s book value at a (unleveraged) compound rate of 6 per cent over five years.

Market euphoria for tech-related investments is reflected in the shrinking size of the historical discount of Kinnevik’s share price to its net asset value. The market has finally given the Swedish conglomerate some credit for its long-term investment perspective. However. rising market valuations also mean repeating its success will be harder than ever.

If you are a subscriber and would like to receive alerts when Lex articles are published, just click the button ‘Add to myFT’, which appears at the top of this page above the headline