Following the global financial crisis, non-bank financial investors have become increasingly important in the global financial markets and for policy makers. Non-bank financial investment behaviour with increased exposure to institutional investors' allocations to alternative investments indicates financial sector deepening and can contribute to economic growth. This paper seeks to analyse the various types of investors' allocations and their trends towards alternative investments in the South African (SA) financial market. In particular the study tries to identify what have been the key investment asset classes of different institutional investors (focusing on pension funds and insurance companies) and highlights some of the reasons affecting institutional investors' asset allocations. The paper follows with a discussion on some challenges and/or risks in growing exposure of institutional investors to alternative investments. Finally, the paper draws on some issues for policy makers arising from observed developments and their impact on financial stability.

Keywords: Investment behaviour; Financial stability

Biography: Ms Nonhlanhla Nhlapo started her career in the South African Reserve Bank in June 2000 in the central banking training programme. In June 2001 she was appointed permanently in the Financial Markets Department. In 2002 she was appointed in the Research Department, and is currently an economist in the Capital Market and Flow of Funds Division of the Research Department.

She holds the following qualifications:

Central Banking Diploma – Institute of Bankers South Africa

Associate Diploma – Institute of Bankers South Africa

Advanced Diploma in Central Banking – Institute of Bankers South Africa

B.Com Econometrics – University of Pretoria

B.Com (Hons) Economics – University of Pretoria

She also holds the Registered Persons Examination of the South African Institute of Financial Markets.