There were so many good reasons for Vanguard to fold its first ETF but radical underperformance may stand out for the 'illiquidity' fund

To me this is a case of not giving the fund enough time to reach its potential, performance-wise. Here's why: over the last 3-5 years, investors have focused on the most liquid names in the U.S. investment landscape...names like Apple, Netflix, Microsoft, etc., (essentially the big kahunas in the S&P 500) to the detriment of the rest of the market (and the holdings of this fund in particular). Comparing the U.S. Liquidity Factor ETF to the performance of the VTI is flawed from that perspective in that their investment universes are almost diametrically opposed! My guess is that one would need to runway of at least a full market cycle (typically 6-15 years) in order to prove out a thesis of there being "alpha" in illiquid names. But most advisors and investors don't have the stomach for such time tables. Unfortunate, but that's the way the cookie crumbles.