Portfolios that span multiple asset classes (e.g., equities, bonds, commodities) require a composite benchmark to provide a fair performance comparison.
Single benchmarks (e.g., S&P 500) would not accurately represent multi-asset portfolios.
Elimination of Other Options:
A: Composite benchmarks complicate fund management rather than simplify it.
C: While portfolios are part of the investment universe, this does not necessitate a composite benchmark.
D: Reducing tracking error is a goal but not the main reason for composite benchmarks.
References:
ICWIM Module 3: Details on portfolio management and benchmark selection for performance measurement.
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