Blackstone Profits Soar But Lower Rates Bring Scrutiny to Credit

Blackstone Inc. sent the strongest signal yet that private equity dealmaking is coming back at the world’s largest alternative asset manager as borrowing costs fall.

The expectation for lower interest rates is also a double-edged sword for the firm, threatening profits of Blackstone’s largest business by assets: credit and insurance.

Shares of Blackstone fell as much as 5.9%.

Blackstone’s distributable earnings surged 48% in the third quarter, fueled by a burst of investment exits from its private equity arm, according to an earnings release on Thursday.

“The cost of financing and more availability of capital is ...