NEW YORK ( TheStreet) - Blackstone ( BX) reported a quarterly loss Thursday of $342 million, a signal the deteriorating deal and market environment is taking a toll on the firm.

On a GAAP basis, the private equity firm reported a $274.6 million loss, with negative revenue of $124.1 million. Blackstone -- which gets revenue from a buyout arm, a real estate division and a debt trading operation -- made a $339 million profit in the same period last year.

The loss comes from unrealized losses of investments, which in spite of rising management fee revenue, pushed earnings negative. Blackstone booked $462 million in unrealized losses this quarter after recording a gain of nearly $200 million in the third quarter of 2010 - impacted by falling company values in its portfolios.

In the third quarter, the S&P 500 index fell 14% and the MSCI World Index dropped 17%. Meanwhile, the VIX, a gauge of general risk aversion averaged 31 during the quarter, reflecting an almost doubling of fear from the second quarter's average level of 17.

Shares fell less than 1% in early trading to $13.12 a share. The company's stock has fallen over 7% this year and 62% since its 2007 IPO.

Chief executive Steven A. Schwarzman said in a press release announcing earnings, "The third quarter presented extremely challenging market conditions, dominated by risk aversion and volatility." He added, "While our earnings were not immune to the sharp downward trajectory of global markets, our limited partner investors affirmed their confidence in our world-leading businesses."

The company, co-founded in 1985 by Schwarzman and Pete Peterson and which went public in 2007 just ahead of the financial crisis netting its founders billions, is the world's largest buyout firm. It still holds blockbuster leveraged-buyout deals like Hilton, Sunguard as private companies, in addition to large interests in recently IPO'ed companies like Kosmos Energy ( KOS), Nielsen ( NLSN) and Freescale Semiconductor ( FSL).

Because of a fall in markets - and the value of its portfolio companies, Blackstone reported a $319 million loss in its private equity portfolio, which it calls economic net income. It contrasts to a year earlier when companies it held were rising in value and primed for IPO's or mergers - in the third quarter of 2010, its private equity arm earned $111.9 million.

In its credit business where it's recently made acquisitions for a push into European debt, revenue fell 89% to $15.4 million from this time last year.

Nevertheless, investors looking for company buyout earnings higher than bond yields or stocks continue to pump money into private equity funds. Blackstone announced that fee-earning private equity assets under management increased 52% to $37 billion as a result of opening its BCP VI fund and net inflows of money.

A bright spot were its fee earning revenue, which overall gained 18% to $442 million in the third quarter. Base management fees and transaction fees were boosted by some investments that are now profitable and that earn fees.

If deal making volumes recover, Blackstone may play a big role in takeovers. Overall, across its divisions, assets under managemen rose to $157.7 billion, from $119.1 billion.

In addition, the company reported it's sitting on $16.9 billion in "dry-powder" -- meaning unused cash for new buyout investments.

Volatile markets arent just impacting private equity, on Tuesday, Goldman Sachs ( GS) reported its second ever quarterly loss as a public company. JPMorgan ( JPM), last week, reported a nearly 50% drop in its investment banking fees, leading to its worst investment bank earnings since the financial crisis when excluding debt adjustments.

-- Written by Antoine Gara in New York