In just under three months of trading, VIDI has fallen behind IXUS by almost 300 basis points. Yet it has also outperformed the iShares MSCI Emerging Markets ETF (EEM) by 350 basis points.
A three-month window of underperformance does not invalidate the strategy. But it does make the point that no smart-beta fund will outperform its market-cap weighted benchmark all the time. Smart beta may seek to add value, but of course there is no guarantee of outperformance.
VUSE may get off to a great start or a lousy start, but any investor considering a smart-beta product needs to be able to stick to a long-term investment horizon. Giving up on a broad-based fund after a few months would simply be time wasted.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.