Blackstone and its peers have provided a lifeline for those investors thirsting for yield in a zero-rate world. An emerging question is how they can keep it up when investors aren’t so parched.

In the 12 months through the third quarter, Blackstone has had inflows of nearly $150 billion, the firm reported on Thursday. When rates are higher a concern may be that some investors, satisfied with plain-vanilla yields, will direct funds elsewhere. Rising rates also can put pressure on market multiples that have helped fuel a huge...

Blackstone and its peers have provided a lifeline for those investors thirsting for yield in a zero-rate world. An emerging question is how they can keep it up when investors aren’t so parched.

In the 12 months through the third quarter, Blackstone has had inflows of nearly $150 billion, the firm reported on Thursday. When rates are higher a concern may be that some investors, satisfied with plain-vanilla yields, will direct funds elsewhere. Rising rates also can put pressure on market multiples that have helped fuel a huge boost in profitable sell-downs of investments. Blackstone in the third quarter generated over $800 million more of distributable earnings through net realizations than it did a year earlier.

Right now, Blackstone shareholders are paying a rising premium for distributable earnings—an income measure that removes the effects of market fluctuations. The more than doubling of Blackstone’s shares so far in 2021 has been helped partly by a higher multiple of trailing 12 months of distributable earnings per common share. That is up from about 25 times at the end of January to now over 30 times.

Some of that expansion may be due to rising hopes of future inclusion in the S&P 500 index. It also reflects natural expected growth in inflows from some big insurance deals, which generate fee-related earnings that investors typically value at a higher level because they aren’t market-dependent. Blackstone and its vehicles also still have lots of unrealized gains.

Still, investors would benefit from a bit of defensive thinking, seeing how much Blackstone has benefited from this market and given the debates around rates and inflation. Investors might also be thinking about rotating into financials that are poised to really benefit from rising rates, like banks.

In general, the longstanding shift into alternative assets rests on more than just low rates. It is often also about sacrificing liquidity for yield—which may be particularly enticing in a low-rate environment but can make sense in any environment—plus a belief in the industry’s ability to generate excess returns. Blackstone also offered analysts a couple of specific rising-rate offsets on Thursday: For one, the bulk of its credit portfolio is invested in floating-rate debt, so yields rise as interest rates climb. The firm also says it is very focused on particular secular-growth sectors that shouldn’t be as vulnerable to falling market multiples.

An example given was betting on a garage-door company: A desperate need for more home building equals more garage doors, plus garages are potential access points for delivery of e-commerce purchases. The firm is also increasing its footprint in infrastructure funds, which it says investors view as a hard asset, and has lots of exposure to shorter-duration things like rent-generating multifamily housing.

Diversification of Blackstone’s funding sources also is a driver of expanding value. More permanent capital structures, like management deals with insurance companies, help with the predictability of fee-related revenue.

Shareholders should be thinking about rising rates. But they also shouldn’t act rashly.

Write to Telis Demos at telis.demos@wsj.com