LRU typically makes fairly bad decisions since it throws most of the
information it has away. I recommend looking up LRU-K and similar
algorithms, just to get a feel for this; it is basically the simplest
possible algorithm short of random selection.
Note that Linux doesn't even have an LRU; it has to approximate since it
can't sample all of the pages all of the time. With a hypervisor that
uses Intel's EPT, it's even worse since we don't have an accessed bit.
On silly benchmarks that just exercise the disk and touch no memory, and
if you tune the host very aggresively, LRU will win on long running
guests since it will eventually page out all unused guest memory (with
Linux guests, it will never even page guest memory in). On real life
applications I don't think there is much chance.