May 10, 2021 · 48m · capital-allocators
Innovation in Private Markets 3: Sulaiman Alderbas – A Massive Restart at PIFSS (Capital Allocators, EP.194)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Sulaiman Alderbas, Head of Alternative Investments at Kuwait's $130 billion Public Institution for Social Security (PIFSS), details the comprehensive organizational overhaul, governance reform, and portfolio turnaround of the sovereign pension fund. He shares strategic insights on replacing traditional fund-of-funds with bespoke SMAs, executing disciplined due diligence, and expanding an innovative GP stakes program.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 18.8% of the talking time here. How this is scored →
Ted as informed peer 4.9 Guest teaching 5.0 Guest disagreement 0.2 Ted pushing back 0.3
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 44:44 Firm stance on manager capacity pressure and discipline
Sulaiman firmly describes rejecting manager pressure to rush allocation decisions during COVID capacity crunches, asserting rigorous institutional discipline regardless of external timelines.
Hardest push from Ted ▶ 44:27 Ted challenges Sulaiman on claiming long-term horizon while making quick changesTed directly pushes back on the apparent contradiction between branding PIFSS as a patient long-term allocator and making rapid manager adjustments within a short multi-year timeframe.
Biggest teaching moment ▶ 17:05 Empty hard drives and the reality of legacy record-keepingSulaiman educates Ted on the startling lack of baseline documentation he inherited, illustrating how the IT team delivered two completely blank local hard drives for a massive institutional portfolio.
Ted holds their own ▶ 5:39 Ted highlights his firsthand background with Sulaiman at Kuwait FundTed displays his insider familiarity with Sulaiman's background and operational playbook from when Sulaiman was his direct institutional client during his hedge fund days.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Early Background, Education, and Discovering Hedge Funds | 4 | 2 | 0 | 0 | Ted opens the interview exploring Sulaiman's educational background at Purdue and early career rotations at Wafra. The tone is open and conversational as Sulaiman explains how rotating through asset classes sparked his intellectual interest in hedge fund allocation. | |
| Lessons from Kuwait Fund's Fund-of-Funds Portfolio Model | 5 | 4 | 0 | 0 | Ted mentions their past professional relationship when Sulaiman was his client at Kuwait Fund. Sulaiman details the unusual architecture of running 30 fund-of-funds and learning to distinguish absolute return mandates from equity hedges. | |
| Line-Item Transparency, SMA Evolution, and Knowledge Transfer | 5 | 5 | 0 | 0 | Ted inquires about balancing transparency across 900 line items with generating net alpha. Sulaiman explains shifting from commingled fund-of-funds to customized SMAs to eliminate layered fees on duplicate mega-manager holdings. | |
| Arriving at PIFSS: Uncovering the Legacy 100-Billion Portfolio | 5 | 5 | 0 | 0 | Ted reacts with surprise when Sulaiman explains inheriting an opaque 100-billion-dollar portfolio where he only recognized 1 out of 80 line items. Sulaiman outlines the governance and legal crisis facing PIFSS when he arrived. | |
| Organizational Overhaul and the "Three Ps" Framework | 4 | 5 | 0 | 0 | Sulaiman details the restructuring initiated under CIO Mishal Al-Othman, reorganizing the institution from three siloed departments into six specialized front-office units built around the Three Ps framework. | |
| Rigorous Portfolio Diligence, DDQ Auditing, and 60% Redemptions | 4 | 6 | 1 | 0 | Sulaiman recounts finding empty hard drives upon arrival and launching a comprehensive 25-page DDQ audit right before Christmas. He explains the decisive execution of redeeming 60% of existing manager relationships due to compliance, dependency, and FX issues. | |
| Market Re-engagement and Constructing Core Portfolio Buckets | 5 | 5 | 0 | 0 | Ted asks how Sulaiman rebuilt the portfolio and re-engaged top managers during a bull market. Sulaiman explains rejecting traditional benchmark bucketing in favor of tailored absolute return and equity hedge sleeves. | |
| Portfolio Sizing, Knowledge Sharing, and Regional Allocation Frameworks | 5 | 6 | 0 | 1 | Ted probes Sulaiman's regional conviction regarding why European fundamentals outperform while Asian exposures require market-neutral structures. Sulaiman articulates his differentiated regional philosophy, consulting industry leaders like Andre Perold and Gideon Berger. | |
| Performance Turnaround and Growing the GP Stake Strategy | 5 | 6 | 0 | 0 | Sulaiman walks through quantitative metrics proving the turnaround, citing a rise in Sharpe ratio from -0.2 to 1.0 and a swing to +3% alpha. He details expanding the GP acquisition stake strategy managed via Wafra. | |
| Institutional Synergies, GP Partnerships, and the Opportunistic Book | 6 | 5 | 0 | 0 | Ted asks technical questions regarding GP ownership stakes versus standard LP allocations. Sulaiman elaborates on the strategic book, institutional synergies across Kuwait's sovereign ecosystem, and spinning off an opportunistic book. | |
| Sovereign Demographic Strengths, Structured Credit, and Hybrid TMT Co-Investments | 5 | 6 | 0 | 0 | Sulaiman highlights Kuwait's sovereign demographic advantages with a young population that enables long liquidity horizons. He shares innovations including shifting structured credit to closed-end funds post-COVID and structuring 70/30 hybrid TMT co-investments. | |
| Team Culture, Crisis Management, and Long-Term Partnership Discipline | 6 | 5 | 1 | 3 | Ted presses Sulaiman on how PIFSS balances communicating a patient, long-term investor identity with swiftly pivoting away from underperforming strategies like Asian market-neutral. Sulaiman explains distinguishing operational business risk from temporary market underperformance. |
Statements from this episode (21)
Alderbas: Kuwait Fund held 30 fund-of-funds simultaneously
“We had at any point in time, 30 funder funds.”
Alderbas: Kuwait Fund beat the HFRI Fund-of-Funds benchmark year after year
“And that created certainly turbulence, but at the midst of it, and throughout the whole program, we had one single benchmark, and it was the HFRI Fundafund benchmark. And we beat that benchmark year and year out.”
Alderbas: Kuwait Fund had roughly 900 line items with ~50% overlap
“So when we first started, we had roughly 900 individual line items. Overlap there was probably 50%.”
Alderbas: PIFSS replaced commingled fund-of-funds with bespoke SMAs
“The first thing I did here at PIFS was instead of going with Commonwealth Fund of Funds, we went with SMAs and SMAs with leading alternative asset managers that firstly act as extensions to my team and my book and whatever we can do Directly, because of the gu…”
Alderbas: PIFSS completes internal reviews before consulting partners' research
“So any manager has a direct allocation, even if it's the biggest in the world, has to go through a defined process, review process, and that review process means reaching out those fund of fund partners, looking at their research, Papers, but only after we're …”
Alderbas: PIFSS portfolio had only one recognizable line item out of 80
“I look at the book and out of 80 line items that they showed me, I only knew one.”
Alderbas: PIFSS managed $100B and held 40% in cash upon his arrival
“A hundred billion. And they were sitting at 40% cash.”
Alderbas: Inherited PIFSS alternatives book held 80 items sized 0.5% to 13%
“So the first thing that happened was when I took over the book, I was given a book of 80 line items. The biggest position was a 13% position and the smallest was 50 basis points.”
Alderbas: PIFSS redeemed 60% of legacy alternatives portfolio after audit
“We redeemed 60% of the book.”
Alderbas: PIFSS refuses to settle for second-tier managers if top-tier is unavailable
“So if we don't get the allocation today, it's fine. We won't go to a second-tier manager because we didn't get the top-tier.”
Alderbas: PIFSS caps portfolio sleeves at 30 holdings to limit fees
“We don't want to be over-diversified, because then it's going to be costly, and we're going to be blaming the high fees and everything around it. So we said, the max we're going to have in any one bucket or portfolio is 30, right?”
Alderbas: One PIFSS market-neutral position equals its entire activist bucket
“One single position in my market neutral bucket is the equivalent of all of the line items I have in the activist bucket.”
Alderbas: PIFSS restricts Asian allocations strictly to market-neutral funds
“In the US, it's all about execution speed and technology, and we're going to go with the startups. We're only going to go occasionally with the fundamentals that have an edge or something depreciated. Asia, we said we're going to go only with the market neutra…”
Alderbas: Asian equities only make sense via market-neutral strategies
“All right, we can't label it as Asia because every country has its different culture and way of doing things, so we have to change our approach and realize that there it's a beta market, it's a volatile market, and it would only make sense on a net basis to do…”
Alderbas: PIFSS alternatives book achieved 7% return and positive 3% alpha
“Almost four years later, so by the end of December, the book collectively had a seven percent return on a six percent volatility. So that's a sharp of one. And the beta to the HFI
Fund weighted composite came down from 77 basis points to 63. What was amazing w…”
Alderbas: PIFSS expanded GP acquisition strategy from 6% to 14% of NAV
“When we moved over with the 40 line items that we took from the open-ended book,
We asked the private equity team to give us the GP acquisition strategy, and that strategy at that time made six percent of our book, of NAV. We grew that book to 14% of NAV, 20% …”
Alderbas: PIFSS holds minority stakes in 14 GPs and 6 revenue-share agreements
“So with regards to the strategic relationships that we have 14 GPs, Where we own five to 30% of that specific business, and we have six businesses where we have revenue share out of that”
Alderbas: GP stakes contributed 5% of PIFSS's 12% alternative return in 2020
“In 2020, my book delivered a 12% performance. Of that 12%, five percent came from the strategic book.”
PIFSS restricts esoteric credit investments exclusively to closed-end fund formats
“All esoteric social credit is going to strictly be done through close ended fund formats. And that is because While we're long-term investors, we don't want the market to take advantage of us or other investors. We're only going to do investment-grade social c…”
PIFSS splits TMT allocations into 70% hedge funds and 30% co-investments
“What we did was we partnered with one of the best TMT managers, and we like the portfolio and the hedge fund specifically, but we felt that we could up the volatility there, and what we did was that we said, 70% of that book will be in hedge funds, and 30% is …”