How to "spend" 100 billion?

```

100 billion.

In the history of China’s A-shares, this is a “major threshold.”

In 2021, several of the most influential fund managers in China tried to manage assets of this scale but “failed to succeed.” In the following four years, except for passive index replication, active equity fund managers no longer attempted this challenge.

In 2025, a “national-level” investment team is once again attempting allocation on the scale of hundreds of billions. This is the Honghu Fund—an insurance private equity fund jointly funded and established by China Life and New China Life Insurance.

As a private equity institution established by the two largest and most relatively equity-savvy insurance companies in the industry, this company’s capital deployment starts right at hundreds of billions.

In just over a year, the fundraising scale of Honghu Fund Phase I, II and III directly surpassed 100 billion, and the first phase has already made a profit of 5.684 billion.

This is what ambition means, what it means for a great bird to spread its wings, what it means for “pulling on one hair to move the entire body”—this is it!

And for now, it seems that Honghu Fund will probably take a “path that no predecessor has walked before.” How will this path fare? What kind of rhythm has it developed? It’s drawing a lot of attention.

Honghu Fund Phases I, II, III Enter the Market in Quick Succession

Due to the unique needs of insurance capital’s pilot long-term equity investment, this trial initiated jointly by China Life and New China Life is actually a dual-layer management structure.

The management company is called “Guofeng Xinghua,” full name “Guofeng Xinghua (Beijing) Private Equity Fund Management Co., Ltd.”

The private equity products established are called “Honghu.” Among them, the full name of Phase I is “Honghu Zhiyuan (Shanghai) Private Equity Investment Fund Co., Ltd.”; Phase II is “Guofeng Xinghua Honghu Zhiyuan Phase II Private Securities Investment Fund”; Phase III is “Guofeng Xinghua Honghu Zhiyuan Phase III Private Securities Investment Fund (No. 1 & No. 2).”

Phase I completed registration in March last year, Phase II in the first half of this year, and Phase III in the second half of this year, with total investment in Phase III expected to exceed 100 billion yuan.

Highly Concentrated Holdings

Although the three Honghu series products each have a scale of tens of billions, almost equal to the largest public funds in the industry, their presence barely shows up in the semi-annual reports.

The three phases so far each hold very few companies, and those holdings are very concentrated.

Honghu Phase I: Yili Shares, Shaanxi Coal and Chemical, China Telecom.

Honghu Phase II: China Shenhua, PetroChina.

Additionally, the smallest holding among the five stocks is just over 1.8 billion, and the largest approaches 6 billion.

There are no micro holdings at all.

This highly likely means that the fund manager has adopted a very concentrated position strategy.

Not Index Investing

Besides showing a “highly concentrated” investment scheme, the above holdings also show that the fund does not follow any index strategy.

First, the five stocks currently allocated and their market values clearly do not correspond to any index constituents.

Second, any fund of several hundred billion using index-based strategies would hold far more than just five stocks.

For example, the E Fund ChiNext ETF, at almost 100 billion in size, shows up 72 times in listed companies’ interim reports.

The ChinaAMC CSI 300 ETF, at a scale of over 190 billion, shows up 74 times in the same period.

Both numbers clearly exceed the Honghu series funds’ cumulative presence—five times.

What Are the Stock Selection Criteria?

The holdings of Honghu Phase I first attracted attention.

At first glance, these three companies—spanning consumption, energy, and communication—seemingly lack an obvious logic. But from an insurance private equity investment perspective, they actually share some marked traits:

First, abundant free cash flow. Whether the dairy giant, the coal resource leader, or the state telecom operator, they're all industry cash cows with low reinvestment pressure, strong profitability, and sustained dividends.

Second, stable industry-leading positions. All three are top players in their respective industries, with market share advantages and pricing power, and are highly resistant to economic cycles.

Third, clear dividend returns. Shaanxi Coal is especially known for high dividends, Yili and China Telecom have also been steadily increasing shareholder returns, which fits insurance funds’ preference for “visible dividends.”

Fourth, a policy safety cushion. Consumption, energy, and communications are all national strategic industries with clear policy orientation and controllable risk boundaries, suiting the large, steady-seeking capital of insurers.

Heavy Positions in “Daily Money-Making” Stocks

Wallstreetcn · Zishitang notes: In Honghu Fund’s eyes, the key holdings are companies that can “count cash every day.”

Let’s break it down specifically:

Yili brought in over 60 billion yuan in cash in the first half of the year—hundreds of billions per quarter typically, and even up to more than 100 billion in the high season. The dairy business has clearly become a steady “cash harvester.”

Shaanxi Coal is like a “cash waterfall,” sucking in 86.3 billion yuan in the first half of 2025. During coal price booms, a single quarter can easily cross the 100 billion mark, turning resource dividends into real money.

China Telecom is also a “billing-style” stability machine, bringing in more than 240 billion yuan in operating cash flow in the first half, often rolling in hundreds of billions a quarter.

According to Tonghuashun, the dividend yields for Yili, Shaanxi Coal, and China Telecom are 4.37%, 6.76%, and 3.54% respectively.

Potential Investment Logic

Judging by Honghu’s stock selection and financial metrics, this institution is likely sticking to the logic of: seeking enterprises with stable operating cash flow, sustainable capital return, and long-term dividend capacity.

In a nutshell: “Cash flow is king.”

This also fits very well with Honghu Fund’s setup mechanism. According to relevant accounting standards, Honghu Fund can reap continuous dividends through active investment in high-dividend stocks. At the same time, capital appreciation from realized gains on heavy holdings further increases its total assets in every phase.

Also, it avoids the short-term profit “backfire” or excessive “run-up” to the two insurance companies caused by fluctuations in equity value.

Additionally, the emergence of Honghu Phase II reveals another possibility: the manager may treat Phase I and Phase II as an asset portfolio for overall management. Thus, the holdings currently revealed for Phase II do not overlap with those of Phase I.

We can also see that although Phase II was established recently (May 27, 2025), it has already completed its main positions, and its holdings reflect a similar path to Phase I, yet with different stocks. This probably means the operation team maintains a "buy list," and Phases I and II each select stocks from this list in sequence according to certain strategies.

China Life Asset Management’s “Predecessor Experience”

The team managing Honghu Fund comes from China Life Asset Management. We notice that Honghu’s first two heavy holdings—Yili and China Telecom—already had an appearance on the top shareholder list for “China Life Insurance Co., Ltd – Traditional – General Insurance Products – 005L–CT001 Shanghai.”

Here, “Traditional – General Insurance Products” may actually represent the company’s largest, most basic actively managed equity pool.

In other words, this is China Life’s typical “model portfolio” for equity investing, and a good window into their team’s “style” and “genetics.”

According to their disclosed positions, as of the end of June 2025, the top 30 equity holdings of this insurance product in A-shares ranged roughly between 600 million and 17 billion yuan in market value.

(See above chart.) The largest holding is China Unicom, with a market value over 17 billion; followed by China Telecom, Yili, CITIC Bank, Daqin Railway, China Shenhua, Shuanghui Development, China Mobile, China State Construction, and China Merchants Expressway—all in the billions.

Overall key features:

First, industry clustering: finance, energy, telecom, transport, and consumer leaders are the favored allocations for long-term capital.

Second, prominence of leading companies: almost all are top state-owned enterprises with market share and policy cushion.

Third, robust cash flows: these companies all share massive operating cash flows and high dividend payouts.

A Clearer and Clearer “Playbook”

Wallstreetcn · Zishitang further notes: China Life’s insurance account seems to have a nuanced attitude toward financial stocks.

While historical positions do include CITIC Bank, Suzhou Bank, Bank of China and other bank stocks, the size of those positions is far less than in communications, energy, or transport sectors.

If you compare with Honghu Fund’s heavy holdings, the logic matches very clearly. Yili stands for a consumer staples leader; China Telecom is a “cash machine;” Shaanxi Coal matches the insurance account’s resource allocation style.

From this perspective, although Honghu’s scale is still growing and not yet able to “show up” visibly in as many companies as the insurance fund, it is already making choices with a similar strategy:

Seeking large state-owned enterprises with steady cash flow and clear dividends, capturing asset appreciation opportunities through robust “real” capital flow.

If China Life’s insurance account is a whole forest, then Honghu Fund is a sapling—small in leaves, but growing in the same direction as the forest.

Risk Prompt and DisclaimerThe market has risks, and investment needs caution. This article does not constitute individual investment advice, nor does it take into account any individual’s special investment goals, financial situation, or needs. Readers should consider whether any opinions, views, or conclusions herein are suitable for their circumstances. Investment is at your own risk. ```