HHLR ADVISORS

#### I. Institutional Overview The 13F filing for HHLR Advisors (the investment arm of Hillhouse Capital, led by Zhang Lei) for the fourth quarter of 2025 reveals a portfolio in a state of profound strategic consolidation. With a total reported value of approximately **$3.08 billion** and a streamlined roster of just **30 holdings**, HHLR continues to exemplify the "high-conviction, concentrated bet" philosophy that has defined Zhang Lei’s investment career. However, the internal dynamics of the portfolio this quarter suggest a significant narrowing of focus, moving away from a broad-based technology and internet approach toward a hyper-concentrated exposure to specific winners in the consumer discretionary and healthcare sectors. **Scale Trend and Capital Deployment** The reported portfolio value of $3.08 billion represents a stable yet disciplined capital base. Unlike mega-funds that manage tens of billions in 13F assets, HHLR’s scale allows it to be nimble while still wielding enough capital to take dominant positions in its preferred targets. The stability in AUM (Assets Under Management) suggests that the institution is not currently in a massive expansion phase regarding its US-listed equity exposure, but rather in a "rebalancing and optimization" phase. The capital recycled from major exits and reductions this quarter has been almost entirely funneled back into its top two positions, indicating a belief that the best opportunities lie within its existing "circle of competence" rather than in new, unproven frontiers. **Holding Style: The Power of Concentration** With only 30 stocks, HHLR’s portfolio is the antithesis of a "closet indexer." The concentration is, in fact, extreme even by hedge fund standards. The top 10 holdings account for the vast majority of the portfolio's value, with the top two holdings alone—**PDD (PDD Holdings)** and **BABA (Alibaba)**—representing a staggering **64.82%** of the total reported assets. This "barbell" structure, where a few massive bets carry the weight of the entire fund while a tail of smaller biotech and tech positions serves as "optionality" or "scouting" bets, reveals a psychological portrait of an investor who is willing to endure significant idiosyncratic risk in exchange for the potential of outsized returns from industry leaders. **Psychological Portrait: The "Conviction Specialist"** The psychological portrait of HHLR in Q4 2025 is that of a "Conviction Specialist" who is currently "pruning the garden to water the oaks." By exiting long-standing positions in companies like NetEase (NTES) and Baidu (BIDU) while doubling down on PDD and Alibaba, Zhang Lei is signaling a shift from a "diversified China tech" strategy to a "winner-take-all consumer" strategy. This suggests a macro judgment that the era of "a rising tide lifts all boats" in the internet sector is over, replaced by a period of intense competition where only those with the most efficient supply chains and the strongest consumer mindshare will thrive. HHLR is no longer interested in holding the "index" of Chinese ADRs; it is interested only in the absolute champions of the current economic cycle. Furthermore, the inclusion of small "new" positions in global giants like **TSM (Taiwan Semiconductor)** and **GOOGL (Alphabet)**, alongside a foray into the **IBIT (iShares Bitcoin Trust ETF)**, suggests a subtle broadening of the horizon. While these positions are currently "fractional" in terms of portfolio weight, they indicate that HHLR is keeping a close eye on global AI infrastructure and alternative stores of value, perhaps as a hedge against the high concentration in its core consumer-focused bets. #### II. Sector Allocation Analysis The sector allocation of HHLR Advisors in Q4 2025 is perhaps one of the most lopsided in the institutional investment world, reflecting a deliberate and aggressive bet on specific segments of the economy while almost entirely ignoring others. **Table 2.1: Sector Allocation and Weights** | Sector | Weight (%) | Analysis of Trend | | :--- | :--- | :--- | | **Consumer Discretionary** | **65.30** | Massive Increase (Core Focus) | | **Healthcare** | **20.44** | Stable/Slight Increase (Secondary Pillar) | | **Financials** | **8.74** | Significant Decrease (Profit Taking) | | **Technology** | **3.09** | Strategic Pivot (New Entrants) | | **Real Estate** | **2.17** | Residual Holding (Stable) | | **Industrials** | **0.10** | Negligible | | **Materials** | **0.07** | Negligible | | **Communication Services** | **0.07** | Massive Decrease (Strategic Exit) | | **Utilities** | **0.03** | Negligible | **Concentration Analysis: A Two-Pillar Strategy** The sum of the top three sectors—Consumer Discretionary, Healthcare, and Financials—reaches **94.48%**. This level of concentration is extraordinary. It indicates that HHLR has essentially abandoned the idea of a diversified portfolio in favor of a "thematic" approach. The investment philosophy here is clear: HHLR believes that the most significant value creation in the current market environment will come from the intersection of **efficient commerce** (Consumer Discretionary) and **innovation-led longevity** (Healthcare). **Sector Rotation Signals: From "Platform Tech" to "Transactional Commerce"** The most striking move this quarter is the near-total abandonment of "Communication Services" (which fell to 0.07%) and the relative underweighting of "Technology" (3.09%). In previous years, HHLR was a major backer of the broad "China Internet" theme, which spanned search, social media, and gaming. The exits from **BIDU (Baidu)** and **NTES (NetEase)** mark the end of this era. Instead, the capital has rotated heavily into **Consumer Discretionary**. This is not a bet on the "average" consumer, but a bet on the **efficiency of the transaction**. PDD and Alibaba are not just retailers; they are massive data-driven ecosystems that optimize the supply chain. By allocating over 65% of the portfolio here, HHLR is betting that in a world of moderate economic growth, the companies that can provide the best value-for-money to consumers will capture the lion's share of the market's profit pool. **Healthcare: The Long-Term "Ballast"** Healthcare remains the second-largest pillar at **20.44%**. Unlike the consumer discretionary bets, which are concentrated in two giants, the healthcare allocation is spread across several innovative biotech firms like **ONC (BeOne Medicines)** and **LEGN (Legend Biotech)**. This suggests a different risk-reward profile: while the consumer bets provide scale and "beta" to the consumer recovery, the healthcare bets provide "alpha" through clinical breakthroughs. HHLR’s persistence in this sector, despite the volatility of biotech, underscores its commitment to "deep research" and long-term fundamental value in life sciences. **Macroeconomic Judgment: Optimism in Efficiency, Caution in Finance** The reduction in **Financials** (down to 8.74%, largely due to the trimming of **FUTU**) suggests a more cautious outlook on market volatility and brokerage activity. Conversely, the massive weight in Consumer Discretionary implies a "pro-cyclical" stance on the consumer, but with a defensive twist—focusing on platforms that thrive on "value" (like PDD) rather than pure luxury. HHLR’s macro view seems to be that the global economy is entering a "post-hype" phase. The exit from Baidu (often seen as an AI play) and the entry into very small positions in Google and TSM suggest that HHLR is skeptical of the immediate monetization of AI in some legacy platforms and is instead looking for "picks and shovels" (TSM) or dominant global players (Google) while keeping its main "war chest" in the proven cash-flow machines of e-commerce. **Industry Trend Insights: The AI Pivot** While the "Technology" sector weight is low, the *nature* of the tech holdings is changing. The exit from Baidu and NetEase—companies that have struggled to find new growth engines outside of their core legacy businesses—and the entry into **TSM** and **GOOGL** indicates a "quality flight." HHLR is moving away from "regional tech" toward "global infrastructure tech." This suggests a belief that the next leg of the technology cycle will be dominated by those who control the underlying hardware (TSM) and the global data moats (Google), rather than regional players who are facing increasing domestic competition and regulatory saturation. #### III. Top 10 Holdings Deep Dive The Top 10 holdings of HHLR Advisors represent the "engine room" of the p ---