NEW YORK (Reuters) - Blackstone said on Thursday its second-quarter distributable earnings rose 3% from a year earlier, as a jump in asset sales in its private equity and credit divisions more than offset a slump in its real estate arm.

The New York-based investment firm's results underscore how a long spell of high interest rates has dragged down some aspects of its business while buoying others.

High rates have weighed on Blackstone's real estate value and made dealmaking more expensive, yet they also boosted the worth of its credit assets and helped tame inflationary pressures.

Hopes that the U.S. Federal Reserve will start cutting rates have contributed to a market rally that Blackstone has seized on to cash out on some of its companies for top dollar.

Blackstone's distributable earnings, which represent cash that can be used to pay dividends, totaled $1.3 billion in the second quarter. This translated into distributable earnings per share of 96 cents, slightly short of analysts' average estimate of 98 cents, according to LSEG data.

A 16% increase in distributable earnings in Blackstone's private equity unit and a 51% jump in its credit arm outweighed the 19% drop in distributable earnings in its real estate division.

Blackstone's core private equity funds appreciated 2% in the quarter, and the firm took advantage of the elevated market valuations to cash out on $7.8 billion of its private equity assets.

Blackstone's opportunistic real estate funds appreciated 0.3% in the quarter and the firm cashed out on $5.5 billion of real estate assets. Its private credit funds posted a gross return of 4.2% and the firm cashed out on $9.5 billion of credit assets.

The company said it saw about $40 billion inflows to its funds and deployed $34 billion in capital from them in the second quarter, the highest level of investment activity in two years.

In real estate, where Blackstone focused on logistics and rental housing and has been wary of the troubled office sector, the firm has invested $15 billion since the start of the year, nearly 2.5 times what it deployed over the same period last year.

"We are planting the seeds of future value creation," Blackstone Chief Executive Stephen Schwarzman said in a statement.

Fee-related earnings, which Blackstone generates from its management and advisory fees, declined 3% to $1.1 billion year-on-year.

The firm posted record total assets under management of $1.1 trillion in the quarter, up 7% year-over-year, driven by strong fundraising, and also declared a quarterly dividend of 82 cents apiece.