Bermuda-based Orbis Mutual Funds will cease to use HSBC Bank of Bermuda as one of its administrative banks and is switching most of its funds to Citigroup by the end of this year.

The Fund made the announcement on its web-site yesterday, explaining that a desire to improve services to clients was the motivation behind the decision to change administrator.

A Bank of Bermuda spokesperson said yesterday that a number of its staff will be affected by the Orbis decision, but the Bank is trying to find them alternative roles.

"We have announced that all administrative, transfer agency and custodial functions for most of the funds will be moving from the Bank of Bermuda, HSBC, State Street and Citco to Citigroup by the fourth quarter of 2007," a statement on the Orbis web-site reported yesterday.

The booming fund has grown from having around $67 million in assets under management in 1990 to almost $14.5 billion in its four equity funds by the end of March this year.

Growth has been so fast that the Fund closed its doors to new investors in March 2006, saying that unchecked growth would prevent it from delivering the standards it had set for itself. The block was a temporary move, but is still in place a year later.

"During the period of our temporary closure to new investors, we have taken steps to improve our client servicing capabilities substantially," the Orbis statement said.

"One manifestation of this is a decision to move all the administrative, transfer agency and custodial functions for most of the funds to Citigroup. Citigroup is a leading global financial services company that does business in more than 100 countries, providing consumers, corporations, governments and institutions with a broad range of financial products and services.

"Citigroup's Global Transaction Services Unit is a trusted custodian with more than $10.5 trillion in assets under custody. It offers operational and administrative support to help its clients focus on their core activities.

"In Citigroup, we believe we have found a partner that brings together a variety of high-quality services and products to provide flexible and innovative solutions to Orbis, both from the perspective of being able to service Orbis Funds domiciled in any region of the world and being able to service our clients in a first-rate manner wherever their location."

A spokesman for the Bank of Bermuda said last night: "Bank of Bermuda is disappointed that the Orbis Funds have decided to end their long standing custodial and administrative relationship with the Bank of Bermuda. However, we remain committed to servicing the needs of our client as they transition to a new service provider.

"The loss of this relationship and business will regrettably affect a number of roles within the Bank and we are looking to identify and explore other employment opportunities for those staff members affected."

Ironically, the announcement comes at a time when Orbis is playing a lead role in trying to scupper its new business partner Citigroup's bid to take over Japanese brokerage firm Nikko Cordial.

Citigroup's $13.4 billion bid, which values Nikko's shares at 1,700 yen, was accepted by the Japanese company's board.

However, Orbis, which owns a 5.8 percent shareholding in Nikko, said the bid undervalued the company and put a sell order on all of its shares at 1,900 yen, urging others to follow suit. "We have owned Nikko Cordial shares since 2002 and believe the interests of our clients will be better served by maintaining the investment rather than selling at 1,700 yen per share," Orbis, the second-largest investor in Nikko, reiterated in a statement last week.

Others have backed the Orbis stand to the point where similar sell orders had been set for 277 million Nikko shares on the Tokyo exchange, or 28.3 percent of the total, Bloomberg reported yesterday.

Failure to win more than two-thirds of Nikko's equity would leave the New York-based bank unable to exercise full power over actions such as mergers or the sale of a unit. That could force Citigroup to seek compromises over major decisions with investors who resisted its offer. The bid expires tomorrow.

"The freedom of management will be constrained," Kenji Mizutani, professor of economics and business at Chukyo University in Nagoya and a former executive director at Mitsubishi UFJ Financial Group Inc., told BNloomberg. "Lack of absolute control may make it difficult for Citigroup to sell units to recoup some of its investment."

The portfolio management of all Orbis funds is overseen by a team based in Bermuda. Supporting investment research is provided by Orbis offices in London, Seoul and Sydney and by Allan Gray Ltd. in Cape Town.