Soft Cap
Soft cap is a target fund size that can be exceeded at the GP’s discretion.
Definition
A soft cap is the manager’s planned size based on pipeline and strategy capacity, but it is not binding. It provides fundraising direction while allowing flexibility if demand is strong and the opportunity set supports growth without compromising discipline. Allocator Context LPs treat soft caps as informative, not protective. The underwriting question becomes: if the fund grows beyond the soft cap, does the strategy still behave the same? Allocators worry about reduced selectivity, larger average deal sizes, or drift into different segments to deploy capital. Decision Authority Soft cap outcomes can influence committee sizing. Some institutions will not increase commitment simply because the fund can accept more; they size to portfolio role and constraints. Others may scale if the strategy is highly differentiated and capacity logic remains credible. Why It Matters for Fundraising Soft caps require consistent messaging. Managers who communicate “we target X but can go to Y if justified” must explain the conditions under which Y is acceptable—otherwise it reads as fundraising elasticity, not discipline. Key Takeaways Target, not a limit Growth must be tied to capacity logic LPs underwrite behavior, not headlines Poor soft cap discipline increases drift concerns