(Reuters) - Blackstone Group LP (>> Blackstone Group LP), the largest alternative asset manager, reported its first quarterly economic net loss in four years on Thursday, as the summer's stock market plunge weighed on the value of its portfolio, even as it generated more cash.

Blackstone's private equity, real estate, corporate credit and hedge fund assets all declined in value in the third quarter. Most of the New York-based firm's capital however is locked in long-term funds, which do not have to sell assets if valuations are low, so the losses were mostly on paper rather than realized.

Blackstone's earnings will be seriously affected if corporate valuations continue to be suppressed over several quarters. And if the market for initial public offerings remains as challenging as it has been this week, Blackstone will be hampered in its ability to exit some private equity investments.

In the third quarter, the firm continued to generate cash by selling assets selectively at high valuations, and said it expected bargains to come to the market.

"Recent market volatility should create opportunity for us, and we have raised an industry-record $97 billion of capital over the past year to pursue such opportunities," Blackstone Chief Executive Officer Stephen Schwarzman said in a statement.

Blackstone said economic net income (ENI), which takes into account the mark-to-market valuation of its portfolio, was a loss of $416 million in the quarter, versus a $758.4 million profit a year ago.

The negative ENI per share was 35 cents, versus the average negative 29 cents expected by analysts in a Thomson Reuters poll.

Blackstone's private equity funds depreciated 2.3 percent in the quarter, while the value of its opportunistic real estate funds was down 0.1 percent.

Distributable earnings, which show actual cash available to pay dividends, rose 1 percent year on year to $692 million on strong asset divestments.

In the quarter, Blackstone sold British-based holiday resort group Center Parcs to investment firm Brookfield Property Partners (>> Brookfield Property Partners LP), unloaded office space at the Manhattan building once occupied by the New York Times to Columbia Property Trust Inc (>> Columbia Property Trust Inc).

Assets under management totaled a record $333.9 billion at the end of September, up 17 percent year on year.

Blackstone declared a quarterly distribution of 49 cents per common unit.

(Reporting by Greg Roumeliotis in New York; Editing by Chizu Nomiyama and Jeffrey Benkoe)

By Greg Roumeliotis