Blackstone's Earnings Slump on Choppy Markets

Blackstone Group LP, the largest publicly listed alternative asset manager, said on Thursday its second-quarter earnings dropped as challenging public markets eroded the value of its assets and crimped its lucrative performance fees.

The firm's earnings, however, still beat market expectations as its assets proved resilient in a market slump caused by the euro zone debt crisis and fears over global economic growth, and as the firm generated more cash by exiting investments.

"In an environment characterized by slowing global growth and heightened investor caution, our limited partner investors are entrusting us with a greater share of their capital," Blackstone CEO Stephen Schwarzman said in a statement.

Blackstone, whose investments include The Weather Channel, Pinnacle Foods and SeaWorld Parks & Entertainment, reported that economic net income (ENI), a metric of its profitability that takes into account the market valuation of its portfolio, fell 74 percent from a year earlier to $212 million.

This was enough to beat equity analysts' consensus view, as it translated to 19 cents a share, compared with expectations for 16 cents a share.

Blackstone shares were trading at $13.08, up 1.4 percent in early trading in New York.

Distributable earnings, which show cash available to pay dividends, slipped 1 percent to $188 million. Fee-related earnings, usually the most reliable source of profits, dropped 7 percent to $146 million.

"The earnings were positive because ENI and distributable earnings came in better than expected and realizations picked up despite the macroeconomic headwinds," said Sandler O'Neill & Partners LP analyst Michael Kim.

Alternative asset managers, which have been trading at a discount to traditional money managers such as BlackRock Inc and AllianceBernstein Holding LP, are trying to widen their appeal to investors in the wake of The Carlyle Group LP's IPO in May.

The financial statements of publicly listed private equity firms can be notoriously complex and efforts by investors to predict their future performance fees, which can swing greatly on market instability, result in their shares being highly volatile.

Alternative asset managers say management fees offer a floor on their earnings and performance fees provide upside.

Blackstone's assets under management were $190 billion as of the end of June, little changed from the previous quarter. Fee-earning assets under management were also steady at $158 billion, albeit at a record.

Blackstone declared a quarterly distribution of 10 cents per common unit.

(Reporting by Greg Roumeliotis in New York; Editing by Bernadette Baum)