Does a GP have any obligation to tell LPs why a deal didn't close before the raise was returned

The short answer is that in most cases there is no legal obligation to explain. PPMs (private placement memorandums, the disclosure documents investors receive before committing) routinely reserve broad termination rights for the GP (general partner, the active operator who runs the deal). "Elected not to proceed" usually satisfies whatever the document requires. A securities attorney could tell you in ten minutes whether a specific PPM creates any disclosure duty beyond that, and that question is worth asking before you commit capital to any sponsor.

The industry norm is closer to your form letter than to a detailed post-mortem. Some sponsors do explain, and those explanations vary in quality and candor. Many do not, and returning capital is treated as the end of the matter.

Your instinct about the informational gap is the right one to press on. "Market conditions" as an explanation for two failed raises in four years is genuinely different depending on what it covered. A deal killed because rising rates pushed debt service past what the projected rents could support is a different failure than one killed because the GP could not close the equity gap with investors. The first is environmental. The second is a capital-raising question, and for a sponsor whose job partly is to raise capital, that matters.

What you can actually do is ask the sponsor directly, before committing, what specifically happened in each case. Watch whether the answer is concrete or whether it stays at "market conditions." Concrete means they understand what went wrong. Vague means they either do not know or prefer you not to.

Two failed raises is not automatically a red flag. The explanation behind each one is what tells you something real.

What are the asset types and approximate years for the two failed raises? That context would help narrow down what "market conditions" might actually mean in each case.

"market conditions" is not vague, it is a curtain. Two failed raises with that language on both and no follow-up detail would stop me cold.

I have not been in syndications long but I have been on the wrong end of a deal collapsing with no real explanation, just from the other side. Wholesaling, I had a buyer walk on a 12-acre parcel I had under contract, just stopped returning calls, sent one email that said "timing doesn't work for us right now." I found out four weeks later through somebody else that there was a drainage easement the title search kicked up that I had not seen. They knew, I did not, and their incentive to tell me was zero because explaining the real reason would have opened a conversation about whether I should have caught it first, or whether they owed me the earnest money back in full. Cost me about six weeks of carrying costs and a deal I had to re-market from scratch. The return of capital is not explanation enough. It is the move that closes the conversation before it opens.

A GP who built real deal flow and maintains LP relationships for future raises has every reason to be specific, because specific honesty is how you get re-subscribed. A GP who goes quiet after returning capital is probably protecting something, or someone, and my guess in your case is that at least one of those two "market conditions" deals had an equity problem, not a market problem. Have you asked them directly what the lender said on the second one?