Fade period

The stretch of a forecast during which excess returns decline toward the cost of capital, reflecting the effect of competition.

A business earning 30% on capital against a 12% cost, fading linearly over ten years, arrives at 12% at the end.

Building an explicit fade is what separates a serious long-horizon model from an optimistic one. Assuming a 30% return persists forever is assuming a moat that no competitor ever breaches, and the empirical work on return persistence says that is rare enough to need justifying by name.

The fade rate itself becomes the investment thesis. If you believe the returns hold for fifteen years rather than five, say why, in terms of the specific barrier.

Competition is the base rate. Durability is the claim.

Fade is the honest assumption. Persistence is the argument.