Yes this is the age old argument of value tilting vs. broad based index.

My feeling on this is that the cat is out of the bag and any advantage that may have existed in the past is much less likely to continue into the future. Small value tilting is so easy to do today and everyone recommends it that I’m just not convinced that the payoff is going to continue. There also were long stretches of a decade or more where these approaches lagged the larger cap brethren. So it may work out that it’s a good strategy, or you could be waiting a really long time.

Additionally, for taxable investors these more specialty funds have higher turnover and distributions which eats into the theoretical advantage they may have. They also generally have higher expense ratios so you lose money there as well. Also, much of the data on them before certain dates is reconstituted with the benefit of hindsight and this always concerns me.

Finally, there is currency risk in intl. funds and this could play havoc in the portfolio for US holders if they overweight intl. stocks and the dollar hits a period where it is outperforming other currencies.

Overall I still recommend people just use a broad based total stock market or total international fund combo if they want intl. exposure. When you own the entire stock market you are guaranteed total market returns with no regrets later. It also gives you the best tax efficiency and lowest costs and that’s guaranteed money in the bank.

I wrote about some of these things I came across with value tilting in this post:

http://crawlingroad.com/blog/2009/06/14/keeping-it-simple-a-lesson-from-backtesting/

Is there something available?

phil