In practice
The hard cap is set in the PPM and the LPA, usually alongside a target size and somewhat above it. Raising it generally needs LPAC or investor consent and an amendment. Managers often reach it at the final close, after oversubscribed demand. It is distinct from the target, which is only a goal, and from a soft cap, which a manager may pass.
An example
Round numbers, not a real fundSay a fund targets $2 billion with a $2.5 billion hard cap. Even if investors offer $4 billion, the fund can take only $2.5 billion.
Why it matters
It tells investors the fund will not grow past the size they signed up for, and it is a sign of demand when a fund reaches it.
In the news
Recent stories that use the term- Consonance Capital grows healthcare flagship by 58% with $1.35bn hard cap close
- Aphias Capital beats debut fund target with $1.05bn close
- Bridgepoint reaches €28bn fundraising goal ahead of schedule as ECP performance drives profit upgrade
- Sheridan Capital nearly doubles flagship size with $1.1bn hard cap close, adds $245m healthcare IT fund
- LS Power eyes ‘target rich environment’ for oversubscribed $6bn haul
A definition, not advice; where usage varies the entry says so. Something wrong? Tell the desk.