This year’s IPE awards again sees a bumper crop of entries at an excellent standard.

The year may have had its fair share of tribulations, in the form of market turbulence caused by the sub-prime crisis, the controversy over Solvency II or the proposed pensions portability directive. But Europe’s pension funds have shown a brave face, as ever, in the face of outside distractions. And from Reykavik to Rome and Sweden to Spain, our readers have used the IPE awards once again to showcase their innovative thinking across the board, in liability management, traditional investing, alternative investments, communication and even to help stimulate the creation of a local corporate bond market as in the case of Hansa Pension Fund K3 in Estonia.

As usual, we have taken the opportunity to present these beacons of excellence, forward thinking and practical problem solving in the articles that follow in this supplement. The articles explain the motivation behind each award and each of them is a case study in pension fund excellence in itself.

Pensioenfonds KBC takes IPE’s Gold Award for best European pension fund and no fewer than three other awards: in the Silver category for best corporate fund and best small pension fund, and in the Country Award category for Belgium. The fund has implemented an innovative liability matching programme that allows it simultaneously to meet IFRS and Belgian regulatory requirements as well as to make the returns it needs and to help immunise its sponsor from fluctuations in solvency ratio that would affect the corporate’s balance sheet.

While much of the investment world is alpha obsessed, PGGM’s Silver Award for best industry-wide pension fund focuses on the fund’s application of better management techniques to its €60bn beta portfolio. The fund separated alpha from beta in its portfolios in 2006, implementing what it terms its sophisticated matching approach. This approach exercises a trade-off between risk, costs and flexibility, allocating across various benchmarks and replicating at the level of individual instruments and security selection. The fund believes the approach is scaleable and can be adopted by a wide range of institutional investors.

ABP’s Silver Award for Best Public Pension Fund recognises the fund’s risk management tool. While other pension funds have adopted the Dutch regulator’s standardised solvency test, ABP has developed its own model, which can also handle illiquid asset classes such as hedge funds, private equity and infrastructure - alongside traditional risk factors such as interest rates, credit, stocks, currency and inflation.

In an entirely different, but no less fundamentally important sphere, ABP’s Themed Award for innovation recognises the fund’s contribution to best practice thinking in the field of member communication.

BVK, the Bavarian fund for professional groups, takes the award for best use of commodities. This fund rejected a passive approach in favour of allocating to two commodity funds of hedge funds and three active long-only managers.

APK takes the Themed Award for equities, in recognition of its view that Asia is set to influence the world to a much greater degree than it does today, and that this view is implemented within its equities portfolio. The fund also takes the Themed Award for derivatives use, which recognises the fund’s approach to hedging currency and equity risk. The fund utilises currency forwards and trades and manages them actively. On the equities side, the fund has developed a risk management tool, which helped it maintain its to-date performance in equities for the year over the summer turbulence.

One of the most interesting submissions in this year’s crop was Hansa Pension Fund K3’s activity in its local Estonian corporate bond market. The fund needed local currency bonds to better match its liability profile but issuance was sparse. By proactively informing the market of its intentions it managed to help increase issuance fourfold in the first six months of 2007 compared with the whole of last year. It has also brought about an improvement in reporting standards and collateral agreements for new issues.

Elsewhere in the Themed Awards section, Finland’s Ilmarinen takes the prize for hedge fund investment. Although it still has 40% of its 3% hedge fund allocation in funds of funds, the remainder is invested through single managers. Specifically, the fund is targeting alternative beta. For example, in the area of what it terms structural beta, the fund is also looking to harvest returns from life settlements, environment-based strategies, timber, carbon trading, water and weather derivatives.
PNO Media in the Netherlands, which won the Themed Award category for liability-driven investments, manages its strategy in-house. This includes operational issues as well as active monitoring and the dynamic application of the strategy.

And AP3, one of Sweden’s four main state buffer funds, has adopted a statement of investment principles in long-term forecasting, asset mispricing and active management. The fund uses derivatives, alpha risk budgeting and global tactical asset allocation. Further awards in the theme section went to PKA in Denmark for property, Inarcassa in specialist investment and to Denmark’s PenSam for SRI/corporate governance. As usual, the Country Awards span 15 countries as well as the CEE region.

As ever, this year’s awards have been a testament to the diligence and ingenuity of Europe’s pension funds and we thank all those who took the time to enter.
Last but not least, we thank our panel of more than 80 judges for their time and effort in assessing the funds’ achievements.