On March 31, star fund manager Zhang Kun of E Fund Management disclosed the 2025 annual reports for the funds under his management. Specifically, several of Zhang's funds initiated new positions in companies including Shenzhen New Industries Biomedical Engineering Co., Ltd. (300832.SZ), Cloud Village Inc. (Netease Cloud Music) (09899), Moore Threads Technology Co.,Ltd. (688795.SH), and Metax Integrated Circuits (Shanghai) Co., Ltd. (688802.SH), while substantially increasing the holding in Hong Kong Exchanges and Clearing Limited (00388).
In the annual report, Zhang Kun characterized his current portfolio as offering "high-certainty base returns plus free call options." The base returns stem from dividends and buyback yields supported by low valuations, which already provide superior returns compared to bonds. The call option represents the potential for significant upward revisions in earnings expectations and valuations for these high-quality companies should the domestic economy stabilize and recover, indicated by factors such as a return to positive CPI growth and a rebound in retail sales growth.
Currently, Zhang Kun manages four public funds: E Fund Blue Chip Selected Mixed, E Fund Quality Selected Mixed, E Fund Quality Enterprise Three-Year Holding Mixed, and E Fund Asia Selected. The largest among these is E Fund Blue Chip Selected Mixed, which is also considered his flagship fund. According to the previously disclosed fourth-quarter 2025 report, the top ten holdings of E Fund Blue Chip Selected Mixed remained unchanged, listed in order as: Tencent Holdings Ltd. (00700), Kweichow Moutai Co., Ltd. (600519.SH), Wuliangye Yibin Co., Ltd. (000858.SZ), Alibaba Group Holding Limited (09988), Shanxi Xinghuacun Fen Wine Factory Co., Ltd. (600809.SH), Luzhou Laojiao Co., Ltd. (000568.SZ), Yum China Holdings, Inc. (09987), CNOOC Limited (00883), JD Health International Inc. (06618), and Focus Media Information Technology Co., Ltd. (002027.SZ).
Holdings ranked 12th to 20th were, in order: Shenzhen New Industries Biomedical Engineering Co., Ltd. (300832.SZ), Huierwei Medical Technology Co., Ltd. (688617.SH), Cloud Village Inc. (Netease Cloud Music) (09899), Nongfu Spring Co., Ltd. (09633), Moore Threads Technology Co.,Ltd. (688795.SH), Metax Integrated Circuits (Shanghai) Co., Ltd. (688802.SH), Xian Yicai Network Technology Co., Ltd. (688783.SH), Ke Holdings Inc. (02423), and Bebetter Medical Co., Ltd. (688759.SH). Among these, seven stocks—Shenzhen New Industries Biomedical Engineering, Cloud Village Inc. (Netease Cloud Music), Nongfu Spring, Moore Threads Technology Co.,Ltd., Metax Integrated Circuits (Shanghai) Co., Ltd., Xian Yicai Network Technology Co., Ltd., and Bebetter Medical Co., Ltd.—represent new positions initiated by Zhang Kun.
Concurrently, Zhang Kun substantially increased the stake in Hong Kong Exchanges and Clearing Limited (00388) by 200%. Regarding asset allocation, as of the reporting period end, the equity allocation of E Fund Blue Chip Selected Mixed reached 93.64%. In terms of performance, the fund's net asset value per share stood at 1.8623 yuan by the end of the reporting period, with a net asset value growth rate of 6.86% for the period, compared to a benchmark return of 16.85%.
Furthermore, E Fund Quality Enterprise Three-Year Holding Mixed also significantly increased its holding in Hong Kong Exchanges and Clearing Limited during the second half of 2025, while also initiating positions in Shenzhen New Industries Biomedical Engineering and Cloud Village Inc. (Netease Cloud Music). New additions to this fund included United Power, China Bearing, Southern Grid Digital, Marco Polo, Haian Group, and Guangdong Construction. Its equity allocation reached 93.81% by the reporting period end. The fund's net asset value per share was 0.9684 yuan, with a period growth rate of 11.75%, against the same benchmark return of 16.85%.
Zhang Kun noted in the annual report that a notable market characteristic in 2025 was "linear extrapolation," where investor concerns about "domestic demand" and "consumption" evolved from temporary tactical avoidance to strategic questioning, with many investors tending to view this as a permanent state. However, he emphasized that an important aspect of value investing is resisting innate biases. Quoting Howard Marks, he stated, "Trees don't grow to the sky, and very few things go to zero." Shifting focus from short-term price fluctuations reveals a divergence: on one side, stock prices imply expectations of these companies becoming value traps; on the other, these companies continue to demonstrate robust free cash flow generation, accumulating cash reserves, and increasingly high levels of shareholder returns. Historically, such divergences have often preceded significant opportunities.
Zhang Kun described his portfolio's current state as "high-certainty base returns plus free call options." The base returns, derived from dividends and buybacks at low valuations, already offer yields superior to bonds. The call option represents the potential for substantial upward revisions in earnings and valuations for these quality companies if the domestic economy stabilizes and recovers. Currently, he noted, "Mr. Market" is generously offering this option for free. He expressed a preference for pursuing "roughly right" outcomes over being "precisely wrong." The "roughly right" view, according to Zhang, includes: the enduring upward momentum of the Chinese economy; investing in China's finest companies; their current low valuations; and their active return of capital to shareholders through buybacks and dividends.
Zhang Kun concluded by stating that investing is an infinite game. In the short term, the market acts as a voting machine, filled with emotional noise; but in the long run, it serves as a weighing machine, measuring a company's ability to generate free cash flow. While the realization of value may be delayed, it is ultimately inevitable. Every share buyback, dividend payment, and efficiency improvement initiative contributes to enhancing shareholder value. It is unlikely that the prices of high-quality assets will remain below their replacement cost for extended periods, let alone persist at levels where privatization would be highly advantageous.
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