Hedge funds as 'war machine': Making the positions work

The paper criticises current metaphorical characterisations of hedge funds as either trader/arbitrageurs or speculator/gamblers. We argue that these two different characterisations share a definition-identity-outcome frame within which hedge funds are separate and distinct from other financial actors, and engaged in an activity of buying and selling assets with 'real' and fixed risk/return characteristics. To break with this frame, our article makes two discursive moves. First, it counters metaphor with analogy by replacing the metaphor of buying and selling with the analogy of war, drawing on Deleuze and Guattari's concept of 'war machine'. Second, it combines the military analogy of war with our own political and economic concept of conjuncture to emphasise the relevance of space and time in understanding hedge fund practice and performance. These two moves open up a different approach which highlights the interconnectedness of hedge funds with other financial actors, and the increasing difficulty of distinguishing hedge funds from other financial and non-financial companies who now engage in combat using identical strategies. The techniques of shorting and leveraging are presented as weapons not tools because hedge funds are not just active traders, but active manipulators of those trades, when the goal is to 'make the positions work'. We conclude, however, that this strategy becomes more difficult on new terrain as the economic conjuncture shifts from excess liquidity to credit crunch. © 2010 Taylor & Francis.