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) 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. TheStreet.com checked in with the arbitrager Orrico to get the down-and-dirty on investing in deals. How would you describe your fund's strategy? We run a mergers-and-acquisition based risk arbitrage fund, which means we invest in things like announced deals, spinoffs and corporate reorganizations. While that may sound overly complicated, our goals are fairly simple: capital preservation and consistent positive returns which are noncorrelated to equity or fixed income markets. Over the past five years we are up about 7% annualized, vs. negative 2% for the S&P 500. Could you give a recent example of a deal you invested in? Federated's ( FD) purchase of May is a good example. That was a stock and cash deal where the time line was dependent on an antitrust review. The deal, which closed in about six months, was $17.75 cash plus 0.3115 share of FD for each share of MAY. For every share we bought of May, we shorted 0.3115 shares of FD in order to lock in a spread of about 6% gross. So on an annualized basis, we earned about 12%. This was a $12 billion deal and faced some intense scrutiny from antitrust regulators concerned about concentration in the retail market.