US hedge fund manager Daniel Zwirn, whose two largest funds are being shut down after investors demanded money back, is ready to set up a new fund, Reuters reports.

A number of people who had money with New York-based D.B. Zwirn & Co have asked the manager to set up a new fund and the hedge fund manager is ready to act, a source familiar with the matter said.

The firm, which manages over $5 billion in assets and employs over 200 people, decided in February to liquidate its Special Opportunities fund and its sister offshore fund, after investors asked for about $2 billion to be returned.

Zwirn, who once worked at JP Morgan Chase's Highbridge Capital Management hedge fund group, specialises in illiquid investments and locks up client money for up to three years.

This is a long time even by hedge fund industry standards, especially at a time investors are becoming more nervous about the credit crisis, tumbling stock markets at the start of the year and fears of slower growth.

Zwirn's two funds returned roughly 11 per cent last year, but investors still demanded to get out this year after growing impatient with him in the wake of some accounting problems that delayed the calculation of their investment statements.