Spruce House Investment Management is a hedge fund started by University of Pennsylvania friends, Benjamin Stein and Zachary Sternberg, as undergrads in 2006, write Juliet Chung and Peter Rudegeair for The Wall Street Journal.

Over the years, the hedge fund earned significant profits and managed billions for clients that included the Massachusetts Institute of Technology and wealthy individuals like hotelier Barry Sternlicht.

About a decade after its founding, Stein and Sternberg started to change tack by placing wagers on highflying growth stock. At first, the shift worked. In fact by 2021, the assets managed by their fund had grown to $4.7 billion, compared to $2.2 billion in late 2017.

However, when the Federal Reserve started hiking interest rates, many tech and growth stocks cratered. As a result, Spruce House lost around two-thirds of its clients’ money in 2022.

In a letter to investors, the two referred to this as a period of “psychological torture.”

Today, Stein and Sternberg are trying to find their way back to the top. They’ve told investors they are holding more cash and less concentrated positions and are returning to their investing roots.

“It’s important to remember we are 36, and even though it doesn’t feel this way today, we are just getting started,” they wrote to investors.

Read more about Spruce House in The Wall Street Journal.

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