Alternative capital funds have a very important position in the financial system and in the real economy. International capital flows are very important for the European system of alternative capital funds. Country’s competitiveness in international capital flows of alternative funds is important for alternative investments, which causes the differences in the alternative capital level of investment funds between countries. Capital markets development, liquidity, research and development investment have a positive effect on alternative funds investment. Current level of investment of alternative funds and general acceptance of such investments have a significant impact on the business opportunities of alternative capital funds in some countries. Reputational aspects of private equity and other alternative funds play a key role in fundraising. The integration of alternative funds in the financial system is very important. This dissertation discusses the possibilities and key factors of integration of alternative equity funds in the financial system. The alternative funds enable the development of financial intermediation and diversification in the financial system and the realization of major investment opportunities for investors. This is especially important in today's environment of low interest rates and financial markets volatility. At the same time, the financial system is very important as a provider of financing for alternative transactions and related financial services. Alternative investment funds and their investments are subject to the higher risks than other types of investments because of the large number of factors that can affect the whole process of investing related to these funds. Adequate risk analysis and management system is key to success of alternative funds’ investments. The period after the financial crisis has had a negative impact on the funding of alternative capital funds. Fund investment and fundraising activity significantly decreased and there were doubts about the funds’ future. After partial recovery from recent financial crisis, alternative fund activity was back to earlier levels. Investor interest also recovered to previous levels with current record levels of private equity.