The International Forum of Sovereign Wealth Funds (IFSWF) announced on Wednesday that it is switching its headquarters from Washington to London.
"The decision further reinforces IFSWF's position as a significant global institution," said the group, which represents the world's top sovereign wealth funds (SWFs).
Finance minister George Osborne welcomed the news, saying it was a "vote of confidence" for the British economy.
"I am determined to secure the UK's position as a world class business and financial centre," he said.
Sovereign wealth funds are investment vehicles typically controlled by rich countries with trillions of dollars at their disposal ready to invest abroad.
The IFSWF was founded in 2009 in Kuwait and brings together 26 leading funds from countries including Australia, Azerbaijan, China, New Zealand, Norway and the United Arab Emirates.
Mark Boleat, policy chairman at the City of London Corporation, which runs the City financial district, also welcomed the move.
"The City's international outlook is a major asset that can help to provide a springboard to markets across the globe," he said in a statement.
"Sovereign wealth funds have long recognised the UK's reputation for being open to investment and we hope IFSWF's move will help to strengthen existing partnerships and establish new ones."