With his own fund down 35% in 2008, Bob Rodriguez, manager of the FPA Capital Fund, says the industry’s performance last year “stunk,” MarketWatch reports.

“We managers did not deliver the goods, and we must explain why,” he told colleagues at the Morningstar Investment Conference.

Rather than sticking with mutual funds’ traditional investment discipline of being fully invested and tracking a benchmark, Rodriguez said, fund managers should have wakened up to the magnitude and “extraordinary risk” of the financial crisis and taken a different tack.

“Whether in stocks or bonds, it seems as though the same old strategies were followed: be fully invested and don’t diverge from your benchmark too far,” he said. “If active managers maintain this course, I fear the long-term outlook for their funds, as well as their employment, will be at high risk.”

Funds must adjust their investment mandates so that they will be better focused on macroeconomic conditions and be able to respond to adverse market conditions in the future and retain investor trust, he urged.

“A more focused strategy will be necessary to excel,” he said. “If active managers continue to adhere to their old practices, we should see a contraction in the active mutual fund management universe in the next five to 10 years.”

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