April 1 (Bloomberg) -- South Korea’s biggest pension funds are cutting holdings of local debt to buy stocks in the U.S. and Europe, saying the days when the Asian nation could be counted on to outperform developed markets are in the past.

Both Korea Teachers’ Pension and Government Employees Pension Service plan to reduce domestic notes to below 50 percent of assets in 2014 and add developed-world equities, managers of the funds say. South Korea’s government bonds returned 1.3 percent this year, trailing all Asian markets except the Philippines, and the won slid 1 percent versus the dollar, data compiled by Bloomberg show. The Kospi stock index fell 1.2 percent, while the MSCI World Index rose 0.7 percent.

Selling by public pension funds, which together manage the equivalent of $416 billion, will act as a drag on debt markets in Asia’s fourth-largest economy, Hana Daetoo Securities Co. said. Goldman Sachs Group Inc. recommended at the end of last year that investors cut allocations in developing nations by a third, forecasting “significant underperformance” for stocks, bonds and currencies over the next decade.