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UPDATE 1-Carlyle's second-quarter earnings double

* Q2 post-tax ENI of 73 cents/share vs estimated 74 cents

* Q2 distributable earnings of $324 mln vs $163 mln yr-ago

* Assets under management of $202.7 bln at end-June

(Adds co-CEO comment, shares)

July 30 (Reuters) - Carlyle Group LP said on Wednesday its second-quarter earnings doubled from a year earlier as one of its European buyout funds started paying performance fees, highlighting the growth potential of its private equity business in Europe.

While two U.S. buyout funds accounted for more than half of all of Carlyle's performance fees in the quarter, the Washington, D.C.-based private equity firm said its third European buyout fund was now also a contributor.

That fund struggled in its first few years after it was launched by Carlyle in 2006. It overpaid for some companies and was then hit by the recession in Europe. But it has since recovered and was valued at 1.7 times its investors' money as of the end of June, almost in line with the two U.S. buyout funds.

"Europe and Japan are both priced at about 20 percent lower than the United States. That is too big a discount," William Conway, Carlyle's co-chief executive, told investors and analysts on a conference call.

Like its major peers, Carlyle has diversified beyond corporate buyouts into alternative credit, real estate and funds of funds. Yet private equity dominates its income, accounting for 32 percent of assets under management but 65 percent of its earnings in the quarter.

Carlyle said economic net income (ENI), an earnings metric that factors in the mark-to-market value of its portfolio, soared to $318 million in the second quarter from $156 million a year earlier, as it took advantage of a stock market rally and buoyant capital markets to exit more of its portfolio companies.

That translated to post-tax ENI per adjusted unit of 73 cents versus the 74-cent average forecast of analysts in a Thomson Reuters poll.

Carlyle shares were up 2.4 percent to $35.22 in Wednesday morning trading against a relatively flat S&P 500 Index.

Carlyle's private equity fund portfolio appreciated by 5 percent in the quarter, in line with rival KKR & Co LP's funds, but less than the private equity portfolio of Blackstone Group LP, which rose by 8.4 percent.

Carlyle Europe Partners III, a 5.3 billion euro ($7.1 billion) private equity fund that Carlyle launched in 2006, contributed to the earnings by starting to pay the 20 percent share of its profits that Carlyle is entitled to in the form of so-called carried interest.

The cash from that fund and the rest of Carlyle's portfolio, which has 43 funds in total, contributed to $324 million in distributable earnings in the quarter, up from $163 million a year earlier.

Carlyle's assets under management were $202.7 billion as of the end of June, up from $198.9 billion as of the end of March.

Carlyle declared a second-quarter dividend of 16 cents per common unit.

(Reporting by Greg Roumeliotis in New York; Editing by Bernadette Baum and Chris Reese)