Blackstone has warned of a slowdown in large private equity takeovers due to the upheaval in credit markets. But the US buyout group said the new environment could help boost returns over the long term.

Tony James, Blackstone president, said the meltdown in the financing markets for risky debt would hit performance by reducing fees and delaying asset sales. However, he predicted "better returns for all the money we do put to work", amid falling asset prices and less competition.

"Small funds that were bootstrapping themselves with bridge equity are gone," Mr James said. "The banks are making new loans but they're being more selective and they're leaning towards their biggest and best customers."

The relatively bullish outlook helped provide some solace for new Blackstone investors. The group began trading in late June at $31 (€22.80) and subsequently fell more than 20 per cent. By midday yesterday, Blackstone shares had rebounded 6.6 per cent to $26.95. They were buoyed by the strength of Blackstone's second-quarter results, which included a trebling of profits and revenues.

Co-founded in 1985 by Steve Schwarzman and Pete Peterson, Blackstone became the first large US private equity group to seek a stock market listing, and has come to symbolise the industry's recent boom.

Blackstone, which was reporting for the first time as a publicly traded company, said it earned $774.4 million in net income compared with $224.1 million last year. Revenues in the three months to June 30th were $975.3 million against $324.6 million in the second quarter of 2006. The strong results reflected the bull-market conditions enjoyed by the buy-out industry this year. Revenues in its private equity business jumped from $125.6 million to $426.1million.