risk free rate as performance benchmark

CFAI Reading 52, P148, Q4, I regard all of three answers do not support using the risk free rate as a performance benchmark. If beta changes over time or holdings are concentrated, how can we use RFR as a benchmark?

Sort of tricky…I am thinking you can use the RF rate as a benchmark in many cases for hedge funds…beta shifting over time sounds pretty normal, and concentrated holdings sounds pretty normal for hedge funds too, but “market neutral” can mean several things, and is not necessarily risk free. This doesn’t mean portfolio beta shifting over time and concentrated holdings are risk free, just that you can still use the RF rate as a benchmark with them. Pg 121 discusses this. Hope that helps, let me know.

Thanks Andrew, so the question can be better phrased by using, which of the following *least* supports using RFR as a benchmark, isn’t it?

Yes I think so