I actually use this strategy for my own portfolio. I identify countries with the highest country-wide risk premia, value premia and small cap premia and invest in the assets with the best returns (they also have to meet profitability and anti-dilution screens). Right now I'm in around 150 assets spread across 15 different countries.
Let me say first that while I think this is a great investment approach it is still as scary as hell. You can be behind the market for years and pull yourself out at the worst possible moment. It's all well and good being an index investor in a bear market, you know you're going to climb back up. Yet a strategy that relies on things like the value premia, however well founded and valid you believe it to be, has no such guarantee. It defies in many ways some of the most intuitively powerful theories in finance. So how could it work?
Personally I think value premia will always exist but will slowly decline over time as the market gets better at identifying such systematic mispricings. Human nature will always provide rich pickings, but one day there will be too many people at the table. Right now the discount that the 'value segment' of the market trades at relative to the market as a whole is pretty much bang on its historic average. This to me is strong evidence that systematic mispricing remains. The whole idea behind the value premia disappearing relies on people responding to the research that unearthed it and then buying into the strategy until it no longer works. This clearly hasn't happened yet so I see no empirical basis to say the premia no longer exists. You can make qualitative arguments of course, but I'm not sure I have much to say on that.
As for countries the limits to arbitrage are enormous. The home country bias, restrictions on capital flows, withholding taxes that punish foreign investors, rules on international exposure for regulated companies (think pensions) and agency costs for investment companies all prevent it from happening. Not to mention the sheer sums of money involved. I think there's much to be said from pricing rather than timing the market and a relatively easy way to do that is to invest in cheap countries. It won't always pay off but current data suggests it does, and does so very well indeed.
As to VUKE, it's extremely expensive for what it does. Not to mention very high turnover (costs, taxes). I would stay away. Why don't you just run it yourself? My costs per annum right now are 0.1% of assets at Interactive Brokers by investing directly in the companies. That's lower than many index fund owners, although I do like to sit on my ass.
Hope this helps. If you want to chat about this it feel free to PM me