I don't know if it works as expected, but the hierarchy doesn't work until the second level subfolder (root>folder>subfolder) Furthermore, given that the css expects 3 repetitions of .lil-gui ( & & & ), if we contain several guis within another (container: gui.domElement), the first gui starts the hierarchy in subfolder (level 2), and the rest do so in the level 1 folder.
In any case, I think it is visually more intuitive for the hierarchy to start within the first-level folder.