Morgan Stanley’s David Karandos was a key adviser for the ISTA Insurance Trust, which state officials say loaded up on risky investments and now faces a $68 million deficit.
Sources confirmed Karandos’ involvement. Messages left at his office this afternoon were not returned. Indiana Department of Insurance and trust officials have declined to identify the adviser amid ongoing investigations into the trust’s problems.
The Department of Insurance says 88 percent of the fund’s $19 million in assets are in risky investments, such as hedge funds and real estate limited partnerships. The
percentage rose recently as the fund cashed out more liquid investments to cover
Karandos joined Morgan Stanley in February 2008, after spending five years with UBS Financial Services in Indianapolis.
The ISTA Insurance Trust provides long-term disability coverage for about one-third of the state's 300 school districts and provides health insurance for about 30 districts.
According to the Department of Insurance, the trust's long-term disability business is $40 million short, and its health business is $6 million short. The trust also lacks the wherewithal to make good on $21 million in credits it provided school districts with good claims experience, the department says. Districts are supposed to be able to tap those credits to blunt future premium increases.
Friday, May 15, 2009
Morgan Stanley Broker Advised Broke ISTA Fund
The IBJ's Greg Andrews is the first to name the financial advisor for the now-broke ISTA Insurance Trust. It's Morgan Stanley's David Karandos: