Explain the concept of benchmark portfolios and also explain how they are used to evaluate the performance of a portfolio manager. Give examples.

Benchmark portfolios are standardized portfolios used as a reference point or yardstick to evaluate the performance of an investment portfolio or a portfolio manager. They represent a typical or ideal investment mix against which the returns and risks of an actively managed portfolio can be compared. The primary purpose of a benchmark portfolio is to provide investors and portfolio managers with a clear, objective standard to assess whether the portfolio management strategies have added value beyond what could have been achieved by passively holding a market or segment of the market.

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