The world's biggest investors are moving away from allocatingmoney to government bond markets based on their amount of debt, astrategy that has favored the largest borrowers for threedecades.

Norway's $702 billion sovereign-wealth fund and PacificInvestment Management Co. are starting to shift to indexes thatfavor less-indebted nations with growing gross domestic product,such as Brazil and South Korea. Pimco boosted the proportion ofMexican holdings while trimming the percentage allocated to U.S.issues in its biggest exchange-traded fund. BlackRock Inc., theworld's largest money manager, with $3.8 trillion in assets, has $3billion tied to a gauge based on credit-worthiness rather thancapitalization.

The move away from market-size benchmarks that guide at least $9trillion in fixed-income investments may raise borrowing costs forindustrialized nations and curb those for developing economies.Bonds from the Group of Seven countries underperformed the globalgovernment debt market last year by the most on record.