Management fees were $131 million in the fourth quarter of 2012, up from $121 million for the fourth quarter of 2011, primarily due to higher management fees from the Credit Private Equity Funds and Logan Circle, partially offset by lower management fees from the Liquid and Credit Hedge Funds. Notably, 84% of the alternative assets under management at year end were in funds with long-term, locked-up structures, which provides for a stable, predictable base of management fees.
The Assets Under Management presented for the Credit Hedge Funds includes $496 million related to the third-party originated Value Recovery Funds. Fortress earns fees from the Value Recovery Funds based only on collections.
The Average Management Fee Rate presented for the Credit Hedge Funds excludes the third-party originated Value Recovery Funds. See footnote (1) above.
The Incentive Eligible NAV Above Threshold presented for hedge funds excludes sidepocket investments. The Incentive Eligible NAV Above Threshold presented for Private Equity Funds and Credit Private Equity Funds represents total fund NAV.
The Undistributed Incentive Income presented includes the impact of sidepocket investments on hedge funds. Undistributed Incentive Income for Private Equity Funds, Credit Private Equity Funds and hedge fund sidepocket and redeeming capital account (RCA) investments has not been recognized in Distributable Earnings and will be recognized when realized; Undistributed Incentive Income for other hedge fund investments was recognized in Distributable Earnings when earned. Undistributed Incentive Income for Private Equity Funds includes incentive income amounts of which Fortress is entitled to approximately 50%. Undistributed Incentive Income for Private Equity Castles includes incentive income that would have been recorded in Distributable Earnings if Fortress had exercised all of its in-the-money Newcastle options and sold all of the resulting shares at their December 31, 2012 closing price.
Incentive income recorded in the fourth quarter of 2012 totaled $114 million, compared to $46 million recorded in the fourth quarter of 2011. This year-over-year increase was driven by higher incentive income generated by the Liquid Hedge Funds, Credit Hedge Funds, Credit Private Equity Funds and Private Equity Funds. Additionally, Fortress had $649 million in undistributed, unrecognized incentive income based on investment valuations at December 31, 2012. This includes $620 million from our funds and $29 million from options in our permanent capital vehicles.