In an updated earnings estimate released Monday by Keefe, Bruyette & Woods, Blackstone Group (BK) remained KBW’s top pick among alternative asset managers for estimated fourth-quarter 2010 investment returns.

“Generally, we expect modest improvement in asset values in 4Q. Also, we expect new capital formation remained positive. Despite rally in the shares of each company, we continue to see solid value in the group. BX remains our top pick,” wrote the alternatives team led by Robert Lee at KBW’s North America Equity Research.

Blackstone was raised to estimated quarterly earnings per share of $0.30 from $0.26. Fortress Investment Group (FIG) was raised to an EPS estimate of $0.17 from $0.15; KKR & Co. was raised to $0.59 from $0.36; and Och-Ziff Capital Management (OZM) was raised to $0.61 from $0.56.

KBW’s rating on all four companies stayed unchanged, at Outperform.

The KBW analysts said they modestly adjusted their earnings estimates primarily “to reflect aggregate investment performance” in the fourth quarter. “Among other things, positive investment returns in 4Q10 improve the prospects for near-term performance fee realizations. Recall, our estimate changes for the private equity managers, such as BX and KKR, largely reflect non-cash mark-to-market adjustments, which tend to be modest.”

Despite the recent rally in stocks, KBW said it continues to see solid value in the private-equity group. “We anticipate net flows into hedge fund and many other alternative products remained positive in 4Q10,” wrote the KBW analysts. “We believe this should remain the case over the coming quarters as institutional investors rebalance portfolios and increasingly look for sources of alpha.”