Although the UK split capital investment trust crisis broke in 2001, the saga is very much alive, with negotiations between the Financial Services Authority and the firms involved continuing under the watchful eye of the Treasury Select Committee. But perhaps the most immediately obvious lesson for the fund management industry is that new products should be adequately stress-tested. If this is virtually impossible because the product is so complicated, as was the case with some geared and cross-invested splits, it should not be launched.

An important lesson for the governance of investment trusts is that the board should be appointed before initial marketing of a new trust. The directors would then be in a position to question managers and the trust's advisers before it is too late to change the trust's structural design. By so doing, they could influence the capital structure, investment policy and details of the management contract. Competent directors involved in the product design would then be in a position to spot any potential design flaws before launch. If they are satisfied that the product has been adequately stress tested, they should then ensure that the prospectus clearly explains the risks involved and contains rules for shareholder entitlements.