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A fund liquidity stress-test record links assumptions, triggers, management challenge and remedial action to each fund’s real dealing terms.
A fund liquidity stress-test record should show why each assumption was chosen, how the result compares with the fund’s dealing terms and what management will do when a trigger is reached. A spreadsheet output without challenge, ownership and action is not enough.
Build the test from the fund’s current assets, liabilities, investors, contracts and operational timings. Keep a separate result for each fund or VCC sub-fund, even when the manager uses a common method.
Define the decision that the test supports
State whether the test is intended to assess ordinary redemption coverage, a severe market event, margin calls, investor concentration, a closed market or a combination. Identify the management decision linked to the result.
The revised MAS SFA 04-G08 guidelines address the alignment of fund asset liquidity with liabilities, liquidity management tools, stress testing and governance. Read the current guidelines with the fund’s prospectus, constitution, contracts and the manager’s regulatory conditions.
Do not use one group label for materially different products. Redemption frequency, notice, investor mix and asset settlement can make the same shock produce different decisions.
Record every material assumption
List market-price shocks, trading-volume reductions, bid and offer costs, settlement delays, foreign-exchange moves, collateral haircuts, margin calls and borrowing availability. State the data date and evidence for each value.
For liabilities, record redemption size, investor concentration, notice, settlement timing and any predictable cash needs. Include simultaneous shocks where that combination is plausible.
Distinguish a conservative assumption from a guess. If evidence is limited, state the uncertainty and show a range.
Model time, not only value
A fund can appear solvent yet fail to produce cash by the required time. Show same-day, one-day, weekly and longer buckets where appropriate. Include market cut-offs, settlement cycles, holidays and service-provider processing.
Apply realistic sale sizes and market depth. Avoid assuming that every listed asset can be sold immediately at the last quoted price. For private or restricted assets, record the legal and practical path to cash.
Map redemption payment dates, margin deadlines and other liabilities onto the same timeline.
Challenge investor and redemption assumptions
Use the actual register to identify large investors, connected investors and groups that may redeem together. Consider whether past redemption data covers a genuinely stressed period.
Review subscriptions and redemptions by distribution channel and investor type. A diversified number of accounts may still reflect one adviser or platform decision.
Test both a large single redemption and correlated smaller redemptions. Explain why each scenario is relevant to the fund.
Challenge asset-liquidity inputs
Compare modelled liquidation times with recent trades, dealer indications and portfolio-manager knowledge. Check whether the data reflects the position size and market share that the fund would need to sell.
Include the cost and portfolio effect of selling liquid assets first. That response may leave remaining investors with a less liquid or more concentrated portfolio.
Where valuations are infrequent or model-based, show how uncertainty affects the result. Do not count an untested facility, related-party loan or asset transfer as available cash.
Set triggers before the test is run
Define the result that requires escalation, a deeper review or action. Triggers may cover days of available liquidity, cash shortfall, redemption concentration, asset-sale cost, collateral usage or a mismatch with disclosed terms.
Give each trigger an owner and response time. State who can sell assets, draw a facility, activate a liquidity tool, change dealing arrangements or refer a matter to the board.
A trigger should lead to a named decision. Avoid colour labels without an action or deadline.
Record independent challenge
Ask risk, compliance, operations and the portfolio team to review the assumptions from their own evidence. Record disagreements and the final decision-maker. The challenge should cover data quality, model limits, investor treatment and operational feasibility.
The MAS information paper on fund-management risk practices describes supervisory observations on current policies, management oversight, challenge and retained evidence. Treat it as supervisory insight, not as a substitute for the binding documents or legal advice.
Do not erase an earlier model after challenge. Keep the original result, comments, approved change and rerun.
Use a stress-test challenge table
| Field | Evidence | Challenge |
|---|---|---|
| Market shock | History and current conditions | Severity and relevance |
| Asset liquidity | Volume, spread and settlement | Position size and cost |
| Redemption | Register and behaviour | Concentration and correlation |
| Other cash demand | Margin and commitments | Timing and currency |
| Trigger | Threshold and owner | Clear action |
| Remediation | Decision and deadline | Closure evidence |
Turn the result into action
Where the fund cannot meet the scenario fairly and on time, consider portfolio changes, cash buffers, dealing terms, investor concentration, facilities, service-provider procedures or liquidity tools. Check documents and obtain legal advice before changing investor rights.
The Securities and Futures Act 2001 provides the statutory setting for regulated fund management and collective investment schemes. The manager must apply the rules that fit its licence, funds and facts.
Track remediation to verified closure and rerun the relevant test. A policy amendment alone does not prove that cash can be raised or an approval can be made within the required time.
Refresh after material change
Repeat the test after a major investor, asset, derivative, borrowing line, redemption term or service-provider change. Also revisit assumptions after a real event differs materially from the model.
The MAS liquidity implementation record covers the wider programme. The margin and collateral-call register covers fast cash demands. The Singapore VCC launch guide remains the pillar cornerstone.
A well-kept fund liquidity stress-test record makes assumptions visible, invites challenge and links weak results to timely action. The Funds and VCC Structures hub connects the wider library.