(Reuters) - Blackstone Group LP (>> Blackstone Group LP), the world's largest manager of alternative assets, said on Thursday a key measure of its earnings rose by 5 percent, helped by large gains in its private equity unit and strong performance by its real estate, credit, and hedge fund businesses.

Blackstone followed its peer Apollo Global Management (>> Apollo Global Management LLC) in reporting strong appreciation in its buyout funds and higher profits as both benefited from the stock market rally and a string of asset sales.

Economic net income, which reflects the mark-to-market valuation gains or losses on Blackstone's portfolio and is a key earnings metric for U.S. private equity firms, rose to $850 million from $811.6 million in the year-ago period.

Quarterly economic net income was 71 cents per share, ahead of analysts' average expectation of 67 cents per share, according to Thomson Reuters I/B/E/S.

"In 2017, we took in $108 billion of capital inflows, invested more than $50 billion, and returned more than $55 billion to our limited partner investors through realizations – all new records for the firm," Blackstone Chief Executive Stephen Schwarzman said in a statement.

New York-based Blackstone agreed this week to buy a majority stake in the Financial and Risk business of Thomson Reuters Corp  (>> Thomson Reuters Corp), the parent of Reuters News.

Blackstone's assets under management rose to a record $434.1 billion in the fourth quarter, up from $387 billion in the previous quarter.

The value of Blackstone's private equity funds, which account for around a quarter of its assets, rose 6.8 percent in the three months to end of December.

Fourth-quarter distributable earnings - the actual cash available for paying dividends - was up 94 percent on a year at $1.2 billion, as Blackstone took advantage of strong corporate valuations to exit some of its investments.

(Reporting by Joshua Franklin in New York; Editing by Bill Rigby)

By Joshua Franklin