Threadneedle is increasing the American equity exposure in its global funds from underweight to neutral as it expects US economic and profits growth to remain strong.Andrew Holliman, manager of the Threadneedle American Growth fund, says that as America is in a period of less stimulative monetary and fiscal policy, economic growth is likely to slow in 2005. However, he adds that it will continue to grow above trend, and he expects profits growth in 2005 to be about 8-9%. A factor behind this optimism is Holliman’s view that the dollar has now stabilised versus the euro and sterling. In the last two-and-a-half years the dollar has depreciated about 35% versus these two currencies, which Holliman says has held back growth. However, in the last couple of months he says the dollar has strengthened and now looks fair value. Additionally, he says, markets have already priced in any impact of rising interest rates. Earnings and economic growth in America are stronger relative to Britain and continental Europe. In an environment where global growth is decelerating, Holliman says it makes sense to increase weightings in defensive markets such as America. Asian markets, in contrast, tend to be more cyclical. He says: “The emphasis of the American Growth portfolio at present is on quality growth companies. This is to take advantage of the current valuation convergence between high and low-quality companies. We are focusing on those companies that can deliver predictable earnings, because even if they just grow with their earnings, they should be well rewarded in this environment.” For example, in the last six months, Holliman says he has added to the fund’s position in Microsoft. He adds: “It is the companies with rational asset allocation, pricing power and internally financed growth that will be rewarded. We don’t have to rely solely on a strategy of buying companies that will be re-rated as the cycle matures.” Over the last 12 months to June 20, 2005, the Threadneedle American Growth fund is ranked 13th out of 67 funds in the IMA North America sector. This follows a positive return of 11.4%, compared with the sector average of 9.2%, according to Standard & Poor’s.