Exactly. Some people want to maintain their return on capital during a recession even at higher risk of losing their money. That's a choice they make based on desires they have.
Other people make different choices. Which can be quite good ones! US inflation in 2022 was 6.5%, but the NASDAQ lost something like 30%.
Might VCs choose a spray-and-pray approach when money is abundant? Sure. Might LPs choose to give money to those VCs? Yes. But my point here is this is not mean old Jerome Powell ordering around robots or slaves or whatever. VCs can just not invest if there isn't something good. They can return the money or not take it.
Heck, even startups are not compelled to take the money. The last time I did one we eventually decided we had dug a dry hole, so we gave back the remainder of they money to investors. We were not compelled to spend it past the point we thought it was actually a good investment.
> Exactly. Some people want to maintain their return on capital during a recession even at higher risk of losing their money.
But we weren't in a recession when they made those investments, we had negative rates, 6-10% inflation and low unemployment in many countries (and certainly in the US). It's hard to argue that we're in a recession even now, since inflation is still high and unemployment is still low, these layoffs are publicized, but they're not moving the needle much.
> They can return the money or not take it.
What do investors do with the money instead? Yes, they can pass it on to the bank and have a 100% chance of the value going down 6-10% a year. How is that a choice, do pension funds just say "sorry, folks, we didn't see any good opportunities while the fed injected money, so your pensions will be 50% lower than expected"?
You conspicuously ignore the VCs here. They were not obliged to do jack. Neither were the founders who took more money than they could successfully apply. It's funny how many people here are stubbornly unable to find the people with moral agency in the startup funding chain.
But yes, part of fiduciary duty is acting for the benefit of the person whose money you are holding. That obliges them to get the best return possible, no more and no less. If a lack of good opportunities means that the best actual return is a lower one than people hoped, that's the job. Because it's not like the people whose pension money went into FTX are going to do particularly well on the deal either.
Other people make different choices. Which can be quite good ones! US inflation in 2022 was 6.5%, but the NASDAQ lost something like 30%.
Might VCs choose a spray-and-pray approach when money is abundant? Sure. Might LPs choose to give money to those VCs? Yes. But my point here is this is not mean old Jerome Powell ordering around robots or slaves or whatever. VCs can just not invest if there isn't something good. They can return the money or not take it.
Heck, even startups are not compelled to take the money. The last time I did one we eventually decided we had dug a dry hole, so we gave back the remainder of they money to investors. We were not compelled to spend it past the point we thought it was actually a good investment.