* Adjusted ENI per unit 59 cents vs street view of 47 cents
* ENI flat in real estate on performance fees
* Shares close higher
* Executives expect '13, '14 to be more profitable
NEW YORK, Jan 31 (Reuters) - Blackstone Group LP reported a 43 percent rise in fourth-quarter profit on Thursday, capping what it called its best year as a publicly listed alternative asset manager, despite a lackluster performance by its flagship real estate business.
Blackstone's shares closed up 6.1 percent at $18.50 on the New York Stock Exchange. They had previously risen 11.9 percent this month, outperforming the S&P 500 Index, which rose 5.3 percent.
Blackstone's private equity business made a strong comeback in 2012 on the back of higher fund valuations, rising 14.3 percent for the year, as markets rallied. Its real estate portfolio rose 14.4 percent, but earnings were roughly flat based on how the firm booked performance fees last year.
Real estate remained the largest earnings contributor even as private equity profits rose 86 percent in the fourth quarter.
Blackstone, whose investments include The Weather Channel, Pinnacle Foods and SeaWorld Parks & Entertainment, said economic net income (ENI), a measure of profitability that takes into account the mark-to-market valuation of its assets, was $670 million, up 43 percent from a year ago.
Blackstone, the first to report fourth-quarter results in a peer group that includes KKR & Co LP, Carlyle Group LP and Apollo Global Management LLC, said earnings rose strongly in its private equity, hedge funds and credit units.
ENI in its real estate division was down 2 percent to $246 million. Private equity posted an 86 percent rise in ENI to $198 million, hedge funds a 163 percent rise to $82.7 million and credit a 96 percent rise to $107.2 million.
Overall, Blackstone's adjusted ENI was 59 cents per unit in the fourth quarter, topping an average estimate by analysts of 47 cents.
"The strong performance and realized gains coupled with another solid quarter for fundraising reaffirms our view that Blackstone's diversified alternative platform, undervalued future carried interest potential and strong secular flow trends all contribute to what we view as one of the more compelling long-term opportunities in the space," Barclay's analysts wrote in a note.
Distributable earnings, which show cash available to pay dividends, jumped 177 percent to $493.8 million in the fourth quarter as Blackstone took advantage of the buoyant equity and debt capital markets to divest more of its investments.
Among Blackstone's exits from investments in 2012 were an initial public offering of U.S. refiner PBF Energy Inc, valuing Blackstone's investment at 4.7 times what it paid, and further share sales of Team Health Holdings Inc, which averaged a value of 3.9 times Blackstone's investment.
Blackstone also sold its Sunwest senior living business in the fourth quarter, a $220 million investment, making 2.4 times its money in just two years.
"If we did that with every piece of real estate, we would be managing most of the money in the world. But it does happen, and it isn't just an odd outcome," Chief Executive Stephen Schwarzman said on a call with analysts.
In private equity, Blackstone returned $3.5 billion to investors in 2012 at an average 2.1 times their money. Across all its funds, Blackstone said it returned $18 billion to its investors. In real estate, it returned $3.7 billion.
"2013 should be a higher year for realizations in general... and 2014 should be another good year. The portfolio that is maturing the fastest and into which there is the best bid to sell, so to speak, is real estate at this point," Blackstone's President Tony James told reporters on a conference call.
The lack of building and commercial real estate offers an opportunity to sell for a good price even in an economy that is not very strong, James added.
Total assets under management were $210.2 billion as of the end of December, up from $204.6 billion at the end of the third quarter. Fee-earning assets under management were $167.9 billion at the end of December, down from $168.6 billion at the end of the third quarter.
In the fourth quarter, Blackstone raised $3.3 billion for its new rescue lending fund and said it expected it would total $4 billion to $5 billion this year.
Blackstone's undrawn capital, so-called "dry powder" available for deals, was $35 billion at the end of the year. Private equity had $15.7 billion in dry powder and real estate had $11 billion.
Blackstone's financial advisory arm had a record level of revenue in the fourth quarter as some companies and financial investors rushed to close deals by the end of the year to avoid higher taxes. But this was insufficient to offset a 21 percent drop in profits for the year in that business.
New York-based Blackstone declared a quarterly distribution of 42 cents per common unit. It said it intends to increase its base quarterly distribution to 12 cents per unit in 2013, up from 10 cents per unit.
Founded by Schwarzman and Peter Peterson in 1985 as a private equity firm, Blackstone went public in 2007 and has become more of a real estate group in recent years, as this franchise has come to dominate its earnings.