Arguably, adjusting growth projections on the basis of current macroeconomic performance is preferable.

Anything else is tantamount to predicting macroeconomic trends... which, if they have a magic ball for, they can use to make a lot more money than in VC.

>adjusting growth projections on the basis of current macroeconomic performance is preferable.

Really? The economy is cyclical. It means you will always be behind the curve; predicting high growth when low growth is around the corner, and vice versa. We can see this in reality; how much garbage did they invest in 2020-2022? You're probably better off never changing strategy, kinda like buying a broad based ETF.

Being adaptable is, probably, equally as valuable for strategy. But that's not really "projecting".

>if they have a magic ball for, they can use to make a lot more money than in VC

Forecasting isn't about having a magic 8 ball, it's about assigning probabilities to potential future outcomes.

In 2021 when people where buying monkey jpegs for millions of dollars and stonks were all the rage, would a reasonable person think the future growth prospects were higher or lower in the short term?

Nothing you are saying is new to the math PhD's who line the offices of finance companies.

But the market still overwhelmingly (but not entirely) prices things on current trends.

Practically infinite wealth awaits you if you can figure out how to implement your cyclical trends into profitable investments.

If you had that attitude in the 2010s, you are no longer in business. You can't anticipate the next cycle. You need to play the game that's in front of you.

the 2-and-20 compensation model for fund managers incentivizes these boom/bust cycles; you need the markups to raise the next bigger fund so you can lock in and grow your 2% yearly fee. When it all crashes down, everyone can say "wasnt just me, nobody could have seen this coming" and the LP has little alternative. The point is not for a projection to be accurate, the point is to say something that various stakeholders believe (and ideally then go work themselves up into a big money orgy, which is where the big exit money is made by skilled players)

See also:

"Mimetic Societies. The leaders of mimetic societies create rituals mimicking some aspects of what they observe having worked in the past. Not because they think it might work, but because their followers think so." https://x.com/scottastevenson/status/1729914687846769061?s=2...

In 2-and-20, isn’t 2% the fee, not 20%?

2% per year! but thx i will edit

Both are fees. 2pc is the mgmt fee. 20 the performance fee.

Just being pedantic :o)

Nobody predicted the fed would raise rates as quickly as they did.

I agree that most people bet that rates would not rise fast.

But it’s a classic case of wishful thinking to not consider that and instead act like the highly unusual period of rock bottom rates was a permanent fixture.

Rates were going to rise, it was always a question of when and how fast.