Russell Investment’s risk-modelling for defined-benefit funds has led to a serendipitous development of an Excel-based tool for stress-testing funds’ liquidity.

Surprisingly, according to Russell’s senior consultant Australasia Tony Miller, the application is now being picked up by defined-contribution industry funds.

Equally surprising, Miller said, is the asset consultant’s finding that “by far the most significant determinant of growth is the number of members sending SG contributions”.

Extra contributions and higher retention are of second-order value, Miller said, and SMSFs may have only a “second-order impact on the growth of the large super funds”.

The application differed from other risk-modelling tools “which don’t look into the moving parts,” Miller said.

Russell’s tool could test across multiple scenarios including investment returns, inflation, asset allocation strategies, exit rates, retention rates, age switching, and disablement by age.

While the number of DB and DC funds using the tool is small – fewer than 10 – Russell is receiving “many inquiries”, Miller said, due to APRA’s finding that 6 per cent only of funds conduct formal liquidity stress-testing.