In the year since its launch, the Old Mutual US Select Equity fund has made some notable changes to its over and underweight positions across various sectors.Launched on May 4, 2004, the 17.8m fund is jointly managed by Ann Hall and Terry Ewing, who joined the group last year from Henderson and Britannic,respectively. According to Hall (pictured), the American stockmarket is facing several challenges this year, including a high oil price and the potential for further interest rate rises because of robust economic growth in the US. “There is a lot to be excited about, but I can’t see the market making tremendous headway until the oil price comes down and the interest rate rises stop,” she says. Earnings growth is also expected to fall, from about 20% last year to 9% or 10% this year, says Hall. However, valuations are remaining reasonable. Since launch, the portfolio has consistently looked to invest in companies with high earnings growth and a low price/earnings ratio. The fund invests across all market capitalisations and currently favours the mid-cap sector because of accelerated earnings growth. Recently, however, Hall and Ewing have reduced the fund’s 8% weighting in basic materials to underweight and industrials to neutral, as the sectors have become largely out of favour in America. In the basic materials sector in particular, Hall and Ewing decided to take profits a month ago because the sector is considered to be cyclical and is correlated to a weak dollar. “There are other areas of the market where we can get earnings growth with less risk,” says Hall. The portfolio has also moved to a 4% overweight position in the healthcare sector, mainly because of biotechs such as Sepracor and Genentech. While the fund has been underweight in financials since launch, the portfolio currently holds its strongest underweight in the sector, at 7%. “Banks have seen net interest rate margin compressions. This is a difficult area to find reasonable holdings in,” says Hall. The utilities sector held the highest overweight position in the fund last year at 6% but has since been reduced to 1%. Hall concedes this move may have been premature as the sector is still performing well.