Blackstone Inc BX.N on Thursday said second-quarter distributable earnings dropped 39% amid a slump in asset sales, overshadowing a key milestone of the firm becoming the first manager of alternative investments such as private equity and real estate to amass $1 trillion in assets. The investment giant’s asset sale proceeds were down due to the sharp slowdown in the commercial property market. The loss was also hurt by rising redemptions at its flagship real estate income trust, contributing 17% to revenue. Rising interest rates and inflation also weighed on mergers-and-acquisitions activity as companies struggled to finance deals with higher borrowing costs.

Blackstone, a global network of investment professionals, has built its business on buying undervalued privately held companies and growing them organically or through acquisitions before selling them at a profit or having them go public. The world’s largest alternative asset manager has benefited from the past decade of strong economic growth and low-interest rates, which sent real estate and company valuations soaring.

During the quarter, Blackstone’s fee-earning assets under management rose 37.1% to $940.8 billion, helped by a rise in its eighth buyout fund and most significant real estate pool. Investor inflows to long-term strategies grew, while withdrawals from short-term funds dipped as the stock market turbulence weighed on investor appetite for riskier assets.

A significant share of reduced asset sales came from Blackstone’s real estate unit, whose net profit sank 94%. The unit’s performance fees jumped 20%, primarily driven by secondary share sales of the firm’s stake in the London Stock Exchange Group (LSEG.L) and Gates Industrial Corporation (GTES.TO).

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While Blackstone’s opportunistic real estate and private equity units saw their asset values slow in the second quarter, the firm’s credit division saw assets appreciate. Overall, its portfolio of investable assets grew 3.5%, excluding the value of its debt and equity investments, compared with 8.3% growth in the S&P 500 index.

The firm’s large size, quality reputation, and deep industry expertise give it a significant liquidity advantage, allowing it to pursue a wide range of potentially lucrative opportunities. As of early 2018, the firm had over $90 billion in “dry powder,” or undeployed capital, available to invest in future deals. In comparison, smaller money managers often cannot pursue attractive opportunities because they do not have enough investable capital.

However, the next downturn could test the strength of this competitive advantage. Rising interest rates, inflation, and political turmoil could weigh on deal-making activity, limiting the profitability of Blackstone’s core businesses. It also may struggle to raise funds in a challenging environment if investors are more cautious about putting their cash with the firm. As a result, the company’s dividend payouts could also decline in the next few years. That makes it critical for the company to boost its cash flow and reduce its debt load.