Arbitrage With John Orrico

Unless stocks take off in the fourth quarter, 2005 is shaping up to be snoozer for investors. When it comes to deals, though, it's already going down as a sizzler.

Low interest rates, clean corporate balance sheets and the urge to merge have turned 2005 into a banner year for mergers and acquisitions. According to John Orrico, portfolio manager for the $123 million (ARBFX Quote)Arbitrage fund, an open-end mutual fund that invests in both stock and cash deals, global M&A volume through September was $1.75 trillion, up from $1.25 trillion last year. Europe alone is on target to crack the $1 trillion mark for the first time since 2000, says Orrico.

As for his own fund, the Arbitrage Fund is flat this year, compared with a 1.5 percentage-point loss for the S&P 500. But don't judge its performance too harshly; the fund isn't designed to correlate with the greater market, an element that makes it a welcome addition to a diversified portfolio. ...