Unfortunately these are known limitations of the TreeListView. Due to the specific nature of hierarchical data, currently it can filter only on items in the root level.
I am afraid nothing can be done with the current version . We are already working on improving performance with large data. We have plans to extend the filtering as well . These however will come in future versions.
Better results in performance and filtering can be achieved using RadGridView with its hierarchy feature but only in case your project requirements fit such alternative.
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