That isn't a stable equilibrium though. Just one has to break and have their portfolio companies outcompete the other funds (LPs are also always looking for the

That isn't a stable equilibrium though. Just one has to break and have their portfolio companies outcompete the other funds (LPs are also always looking for the highest returns) - or a new fund can enter (there's plenty of capital to go around) - it's just not a market where there are few enough firms with strong enough incentives to hold an unstable equilibrium forever. Especially when there are LPs competing for returns. If everyone performs the same, they can't charge higher fees for their funds, they need to compete for LP money, and so on. I'm not saying it'll happen within a few years, but I'm saying on the decades (or almost century) long scales it took for the funding market to evolve to where it is, it'll evolve to take all those factors into account as well. There just aren't enough incentives to keep that sort of unstable equilibrium.