Aug. 6 (Bloomberg) -- Blackstone Group LP, the world’s largest private-equity company, reported its first quarterly profit in a year as the value of some investments rebounded with financial markets.

Profit, excluding some costs tied to its 2007 initial public offering, rose 9.2 percent to $180.8 million, or 16 cents a share, from $165.6 million, or 15 cents, a year earlier, Blackstone said today in a statement. Earnings beat the average estimate for a profit of 9 cents a share by seven analysts in a Bloomberg survey.

A 20 percent gain in global stock markets in the second quarter propped up the value of investments after markdowns contributed to $920 million in losses during the previous two periods. Chairman Stephen Schwarzman has built up advisory and asset-management services to add sources of income after the two-year-old credit crisis brought leveraged buyouts to a halt.

“The early signs are getting better, but it could be a long road ahead,” said Daniel Fannon, a Jefferies & Co. analyst based in San Francisco who advises clients to hold the shares.

Blackstone dropped 96 cents to $14 at 4:15 p.m. in New York Stock Exchange composite trading. Blackstone has risen 33 percent since the end of the second quarter as credit markets stabilize and investors speculate the worst of the LBO bust is over.

Blackstone marked up its private-equity holdings by 3 percent, after marking them down by the same amount in the first quarter. The firm marked down its real-estate holdings by 19 percent in the second quarter.

Unit Performance

Revenue at the firm’s private-equity unit rose to $198.6 million from $92.4 million a year earlier, while its financial advisory revenue climbed to $83.5 million from $72.5 million.

Blackstone’s credit and marketable alternatives segment, renamed from “marketable alternative asset management,” had revenue drop to $140.4 million in the second quarter from $225.1 million a year earlier. The segment oversees the firm’s fund-of- hedge-funds and credit investments.

The fund-of-hedge-funds business expects to book net inflows of about $1 billion this year, Blackstone said. Schwarzman told investors on a conference call today the mood had shifted since the end of 2008 and the first part of 2009.

“It was an absolutely terrible environment for anyone managing money,” he said. “There was a pervasive pessimism about the economy and that functioned to virtually immobilize any decision-maker. That environment has changed.”

Fortified Fortress

Fortress Investment Group LLC, the hedge-fund and buyout firm that last month picked former Fannie Mae Chief Executive Officer Daniel Mudd to succeed co-founder Wesley Edens as CEO, reported second-quarter earnings yesterday that beat analysts’ estimates. Profit was bolstered by a 17 percent jump in assets under management during the period.

Blackstone and its competitors bought companies valued at $1.4 trillion during 2006 and 2007 and now are managing those companies through the worst economic climate since the Great Depression.

Should the rally in the global equity markets persist, Blackstone may sell shares in some holdings through public offerings next year, Schwarzman said on the conference call.

Financing for new deals has been scarce, as banks crippled by losses tied to the credit crisis remain skittish about committing debt. Announced private-equity transactions dropped 82 percent during the second quarter, according to data compiled by Bloomberg.

Blackstone has sought profits in non-buyout businesses, including providing advice to corporations. Schwarzman, who founded the firm in 1985 with Peter G. Peterson, in April hired UBS AG’s head of chemicals banking, David Bradley, to add to its team advising companies on restructuring and takeovers.

The unit, led by John Studzinski, is working with clients including American International Group Inc., the insurer bailed out by the U.S. government.

To contact the reporters on this story: Jason Kelly in New York at jkelly14@bloomberg.net; Cristina Alesci in New York at Calesci2@bloomberg.net

Last Updated: August 6, 2009 16:31 EDT