IKEA: The private investment business modelled on one of its stores

Photo by Leon Neal/Getty Images News / Getty Images
Photo by Leon Neal/Getty Images News / Getty Images

Part of the success of the retail giant IKEA has been explained by the design of its huge stores. They’re laid out like a big maze so shoppers get lost and spend more time in them and as a result part with more money. The maze analogy might also be a good way of looking at the private investment world the family that own IKEA has created.

Of course, IKEA has hit the headlines this week with the announcement of the death of its founder, Ingvar Kamprad. One of the world’s greatest entrepreneurs, Kamprad was also one of the wealthiest individuals alive, at least up until 2011 when his lawyers informed him that most of his fortune had been transferred to a Lichtenstein foundation. He apparently didn’t know the extent of the transfer. A few years later, he lost his Forbes billionaire status completely when Kamprad transferred much of his assets to his sons Peter, Mathias and Jonas.

The second generation of Kamprad children has inherited an extended IKEA-linked business empire, which increasingly resembles a big and diverse investment portfolio. Within that investment portfolio, sometimes the second generation are direct beneficiaries, and other times, they would appear to be indirect.

Where this ownership is clearest is the Ikano Group, which is an independent company spun out of IKEA back in 1988 and is owned by the Kamprad family - so, effectively, the second generation. Peter Kamprad, Ingvar’s eldest son, is the chairman of Ikano. And his two brothers, Mathias and Jonas, are board members. Ikano, based in Luxembourg, owns a number of businesses, including a bank, an insurance business, a foam mattress business, and also IKEA’s business in South East Asia.

Things get much more complicated with the ownership and structure of the main business, IKEA. Its ownership is split in two, with the IKEA Group owning the retail bit and Inter IKEA owning the brand and concept. Under the IKEA franchise system, which led to the split, the IKEA Group pays 3% of revenues to Inter IKEA. In turn, the IKEA Group is owned by a foundation based in the Netherlands. But the more interesting part of the IKEA private investment business is on the Inter IKEA side.

Inter IKEA was divided in May 2016, with the IKEA bit of this business (brand and concept) turned into IKEA Holding based in the Netherlands, and the investment bit of the business controlled by Interogo Holding in Switzerland. Both groups are owned by the Lichtenstein based Interogo Foundation.

Interogo Holding is effectively a private investment office, which operates three distinct investment businesses - a private equity group called Nalka, which is based in Stockholm, a property group called Vastint, based in the Netherlands, and an asset management group called Inter Funds Management, based in Luxembourg.

How much the second generation is beneficiaries of these businesses is difficult to say, given the foundation structure specifies the Kamprad family does neither own nor control the Interogo Foundation. Here’s what IKEA says about the family’s relationship with the Interogo Foundation. “It is however intended that the family of Ingvar Kamprad, as the creator of IKEA, over generations should be offered the opportunity to be engaged in the Supervisory Council (Beirat) of Interogo Foundation, but always in minority.”

Beyond the deeply complicated ownership structure, what’s interesting is the three investment groups  - Nalka, Vastint and Inter Funds Management - that fit under the umbrella of Interogo Holding. None of these groups are looking to raise money from third parties. So, apart from paying salaries, the beneficiaries of these groups would appear to be the foundation, but also members of the Kamprad family.

Ingvar Kamprad was said to have created the foundation structure to ensure IKEA remained private and secretive. That might have been achieved, but it has also created a web of confusing ownership structures that will be difficult to simplify with his death - if indeed that is the intention of the second generation.

That said, IKEA’s convoluted foundation structure, which stops family majority ownership, might just have the benefit of ensuring there will be plenty of money around for many future generations of the Kamprad family. Sometimes complications can have their benefits.