Two Wall Street veterans recently launched a pure commodity hedge fund, Mastiff Fund LP.

The founders of Mastiff believe that commodities are a separate asset class in the early years of a secular bull market.

Recent academic studies show commodities produce risk-adjusted returns comparable to stocks, and they are also negatively correlated with bonds and equities," says Patrick Fleming, who with Jonathan Goodman, launched the fund last February. "We observed that the hedge fund indices do not even include commodities as an asset class."

Mastiff benchmarks against the DJ-AIG Commodity Index. According to the fund's documents: "The managers are fundamentally oriented but also employ a variety of strategies to reduce risk and add performance. These strategies include proprietary trading models, volatility trading, long/short commodity, statistical arbitrage and active cash management."

"We've invested in commodities for years, and wanted to dedicate more of our own net worth to the sector," says Fleming. "We couldn't find any long-biased commodity hedge funds which try to add alpha, hence we decided to launch Mastiff."

"Certain commodities seem a bit euphoric right now, while others are languishing at 30 year lows in price," says Goodman. "A reasoned analysis of the investment landscape suggests that we may remember 2005 for commodities the same way that we remember 1985 for stocks and bonds: the early years of a secular bull market."

Jonathan Goodman is a former partner of retired hedge fund legend Michael Steinhardt and was a founding member of the Goldman Sachs Commodity Strategy Group where he worked with Fischer Black applying finance theory to the commodity markets in the 1980‚s. He is a graduate of Yale and the University of Pennsylvania. Fleming is an alumnus of Salomon Brothers and Lehman Brothers in Tokyo, London and Hong Kong. He has been an active participant in the commodity markets for more than 20 years, and raises cattle and crops on his ranch in Wyoming. Fleming holds a degree in economics from Harvard University.

The pair have raised approximately USD 10 million, and expect to close Mastiff to new investors after assets reach USD 250 million.