April 2 (Bloomberg) -- Daniel Zwirn, the New York-based manager who is shutting down a $4 billion hedge fund because of investor withdrawals, plans to start a new fund, according to four people with knowledge of the situation.

The fund, slated to be called ZLC Global Investments, will focus on companies that have trouble getting financing from other sources, according to the people, who asked not to be identified because the plan is in its early stages. That's the same approach as Zwirn's Special Opportunities Fund, which is being wound down.

Investors in the Special Opportunities Fund may have to wait as many as four years to get all their money back because of hard-to-sell private-equity investments and derivatives based on the underlying value of debt securities. They asked to withdraw more than $2 billion after the fund's 2006 financial audit was delayed, according to a letter sent to clients last month. Zwirn's firm, D.B. Zwirn & Co., manages an additional $1 billion in other funds.

Zwirn, 36, declined to comment on his plans, which were reported earlier by the Wall Street Journal on its Web site.

ZLC gets in name from Zwirn and his partners in the fund: Lawrence Cutler, chief operating officer at D.B. Zwirn & Co.; and David C. Lee, the firm's president.

D.B. Zwirn told investors in early 2007 that an internal investigation found improper financial transfers and accounting of expenses. An independent auditor, PricewaterhouseCoopers LLP, took until December to sign off on its books, according to a copy of a Dec. 3 audit obtained by Bloomberg.

Clients Repaid

D.B. Zwirn has said it was the victim of misconduct by a former employee, and that an investigation showed that current management is above reproach. Clients were repaid with interest on any money they were owed because of the accounting irregularities.

Zwirn previously was a managing director and senior investment manager overseeing special opportunities for Highbridge Capital Management LLC, the hedge-fund affiliate of New York-based JPMorgan Chase & Co.

Before joining Highbridge, Zwirn was a portfolio manager at MSD Capital LP, the money manager for Michael Dell, founder of Round Rock, Texas-based personal-computer maker Dell Inc.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets and participate substantially in profits from money invested.

To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net; Christine Harper in New York at charper@bloomberg.net.

Last Updated: April 2, 2008 19:05 EDT