Chant West said the September fall was caused by falling share markets, but there had been a substantial recovery since then.

“We estimate the median growth fund is up a healthy 2.1 per cent in October so far,” senior investment research manager Mano Mohankumar said.

He said both the share market and the bond market were down in September as central banks around the world signalled they were expecting to get tougher on inflation.

“Markets got over-optimistic and were sold off when it became clear that central banks were prioritising inflation control at the expense of economic growth.

“We are now in a period of heightened volatility, with markets reacting sharply to every indicator that might point to the size and timing of the next interest rate move.”

Growth funds, which have between 60 and 80 per cent of their funds in growth assets, were down 5.7 per cent over the year to September, but down only 0.6 per cent for the financial year so far.

The more conservative balanced funds were down 4.7 per cent for the September year and 0.5 per cent for the financial year to date.

“Most major funds diversify their portfolios far beyond the traditional listed assets with meaningful allocations to assets such as unlisted property, unlisted infrastructure and private equity which help cushion the blow when listed markets fall, which is what we saw in September,” he said.

“However, with 55 per cent still allocated to listed share markets growth funds are able to capture a meaningful proportion of the upside when those markets perform strongly and that’s what we have seen so far in October.”