Public Offering Annual Reports Released! An Overview of the Latest Views from Zhongou Fund’s Lan Xiaokang, Ge Lan, and Feng Ludan

Ask AI · Feng Ludan points out how AI commercialization can bridge the utility gap between models and users.

Reviewing 2025, China’s capital markets overall experienced an upward trend, with major broad-based indices recording significant gains, and sectors like technology and resources performing notably. As the first quarter of 2026 concludes, opportunities and challenges coexist; global markets remain uncertain: geopolitical conflicts push up inflation risks, AI’s impact on employment sparks widespread discussion, and after a valuation reset, can Chinese assets maintain resilience amid volatility? Which sub-sectors have the capacity to cycle through downturns? Recently, public fund annual reports have been densely disclosed, and industry analysis finds that the latest views of several fund managers under China-Europe Fund are quite insightful.

Lan Xiaokang: Before exposing risks, strive for diversification and risk avoidance

Lan Xiaokang’s investment philosophy bears a distinct Eastern philosophical tone. He pursues a state akin to “Traditional Chinese Medicine preventing illness before it occurs, and a skilled warrior achieving no victory,”—the best risk management is to avoid and diversify significant risks before they erupt. In portfolio management, he seeks long-term, predictable, and steady returns rather than short-term explosive gains.

In the China-Europe Rongheng Balanced annual report, Lan Xiaokang writes that the first consideration in investment is risk and cost; investors should cultivate stable habits and predetermined actions to avoid costly risks. He offers a relatable analogy: driving through a green light intersection at dawn, cautious drivers will slow down proactively to prevent running red lights or encountering pedestrians.

Lan Xiaokang emphasizes a second point: that maintaining excessively high long-term compound returns is unsustainable, which he describes as “undesirable.” Stocks inherently exhibit high volatility, and overemphasizing volatility control is also “undesirable,” even increasing portfolio fragility.

He cites the bankruptcy of Long-Term Capital Management as an example, illustrating that overpursuit of high Sharpe ratios may deviate from the essence of investing. Reasonable expectations are especially important, particularly for larger portfolios.

Looking ahead to 2026, Lan Xiaokang remains optimistic about China’s economy and stock market in the long term, but short- and medium-term challenges are increasing—Western countries face widening wealth gaps, AI’s impact on employment, frequent geopolitical conflicts, especially the US-Iran tensions pushing up crude oil prices and inflation risks, which could exert potential pressure on aggregate demand and asset pricing.

“From the A-share market perspective, investors tend to concentrate investments in high-valuation sectors, small- and micro-cap stocks. If global financial liquidity tightens temporarily and risk appetite declines, market adjustments may occur,” he warns.

The core of investment is pricing, which itself is an understanding of value, and value is highly related to the investment manager’s worldview. In the annual report, Lan Xiaokang reiterates his belief in win-win values: “If every social entity emphasizes externality contributions, society as a whole will generate enormous value increments, enabling macroeconomic and social development to proceed steadily and far-reaching.”

Ge Lan: Innovative drugs going global may continue throughout 2026

In 2025, the pharmaceutical and biotech sector oscillated upward amid complex internal and external environments, with structural differentiation within the sector and innovation-driven industries leading the gains. Ge Lan states in the China-Europe Healthcare Innovation annual report that domestic blockbuster drugs boosted revenue growth for related companies, some relying on strong product strength to rapidly expand overseas sales, with more innovative drug companies crossing the breakeven point. The past year saw international licensing of innovative drugs become a significant incremental driver for the sector; Chinese innovative drug assets achieved a qualitative leap in global transactions, with a substantial increase in transaction volume and value share worldwide.

Looking ahead to 2026, Ge Lan remains optimistic about the innovation drug industry chain, while paying attention to the challenges of domestic substitution and overseas expansion of medical devices, and the reversal of difficulties in consumer healthcare.

“The innovative drug sector is expected to remain a core investment focus. From industry trends, top-tier domestic innovative drug companies have accumulated rich experience in international licensing, with core assets highly recognized by global pharmaceutical firms. Technology licensing abroad may continue throughout the year. Moreover, after the normalization of licensing transactions, the more important aspect is the gradual validation of the global value of products, which depends on the speed of clinical progress worldwide, the quality of data releases, and changes in competitive landscape,” she writes in the annual report.

Overall, China’s pharmaceutical industry is shifting from following to leading globally. Ge Lan points out that overseas expansion of innovative drugs, revival of R&D outsourcing, domestic substitution and overseas expansion of medical devices, and recovery of consumer healthcare will remain the industry’s core drivers.

Feng Ludan: The core proposition of AI is bridging the gap between model potential and user utility

In the China-Europe Digital Economy annual report, Feng Ludan summarizes the development of the AI industry over the past year: in 2025, the most fundamental change in AI was the shift from purely technological development to a deep resonance between technology and commercialization.

Technologically, AI large models’ intelligence levels continue to leap, confirming that China’s foundational AI models have entered the top tier internationally, further opening growth space for domestic AI industry chains. Meanwhile, the industry is evolving from L2 reasoning capabilities toward L3 intelligent agents. On the commercialization front, she observes the overseas AI industry’s value realization path: “AI product development → user and usage growth → business model validation → revenue and profit scaling,” which is gradually being validated across multiple verticals and general scenarios.

However, Feng Ludan also warns that there remains a phase mismatch between large-scale capital investment and commercialization results. Regarding the widespread discussion of an “AI bubble,” she believes that “bubble” is a neutral concept, almost an inevitable accompanying phenomenon during the rapid development of all disruptive technologies. From an industry lifecycle perspective, the AI industry is currently in the early to mid-growth stage, with technological breakthroughs and commercial imagination jointly boosting capital investment intensity, leading to a rapid rise in valuation centers. The key issue is not whether a bubble exists, but whether technological progress can continue to open new application boundaries, and whether commercialization can gradually absorb new capital and convert it into real profits.

Looking ahead to 2026, Feng Ludan believes that the core proposition of AI industry is bridging the gap between model potential and user utility. While the underlying capabilities of AI large models have risen to a high level, the actual utility users derive in daily scenarios remains in early release stages. Whoever can excel in productization, efficiently transforming model potential into user value, will be best positioned in this wave of industry transformation.

Fund risks exist; investments should be cautious. The above content is for reference only, does not predict future performance, and is not investment advice. The opinions and forecasts expressed are only those at the time and may change later. Do not quote or reproduce without permission. The fund manager commits to managing and using fund assets honestly, diligently, and responsibly but does not guarantee profits or minimum returns. Past performance does not indicate future results, and the performance of other funds managed by the fund manager does not guarantee the performance of this fund. Before making investment decisions, please carefully read the fund contract, prospectus, and product information documents, fully understand the fund’s risk-return characteristics and product features, consider all risk factors, and assess your own risk tolerance based on your investment objectives, horizon, experience, and assets. Based on understanding of the product and sales suitability opinions, make rational and cautious investment decisions. China-Europe Rongheng Balanced and China-Europe Digital Economy are hybrid funds with expected returns and risks higher than bond funds and money market funds but lower than equity funds. China-Europe Healthcare Innovation is an equity fund with higher expected returns and risks than bond funds, money market funds, and hybrid funds. These funds may invest in Hong Kong Stock Connect stocks. Besides typical market risks similar to mainland securities funds, they also face specific risks due to differences in investment environment, targets, market systems, and trading rules under the Hong Kong Stock Connect mechanism. The fee rates for China-Europe Rongheng Balanced are: Class A purchase fee, amount < 1 million yuan, 1.50%; 1 million ≤ amount < 5 million yuan, 1.00%; amount ≥ 5 million yuan, 1,000 yuan per transaction; Class C no purchase fee; Class A redemption fee, held less than 7 days, 1.50%; 7 days ≤ held < 30 days, 0.75%; 30 days ≤ held < 180 days, 0.50%; held ≥ 180 days, 0%; Class C redemption fee, held less than 7 days, 1.50%; 7 days ≤ held < 30 days, 0.50%; held ≥ 30 days, 0%; sales service fee for Class C is 0.60% per year. Similar fee structures apply to China-Europe Digital Economy and China-Europe Healthcare Innovation funds, with specific rates detailed in the legal documents and sales rules applicable at the time.

Source: China-Europe Fund