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UPDATE 2-British manager Woodford's flagship fund to remain suspended

Justin George Varghese and Carolyn Cohn

(Recasts lede, adds background, quotes from Woodford video)

LONDON, July 1 (Reuters) - British fund manager Neil Woodford will keep his flagship 3.7 billion pound ($4.7 billion) fund frozen for a second month running, leaving hundreds of thousands of small savers without access to their money.

Woodford, one of Britain's best-known money managers, suspended the equity income fund on June 3 after being unable to meet redemption requests, sparking an outcry among investors and prompting an investigation by the country's markets watchdog.

Famed for delivering returns by avoiding the tech bubble in the early 2000s and dodging a hit from the financial crisis several years later, Woodford now faces the anger of retail investors left dangling by the fund suspension.

"Of course, we understand that people want access to their money," Woodford, seated at a trading desk, said in a video posted on the firm's website. "They're very frustrated by not being able to deal in the fund."

The fund's authorised corporate director Link Fund Solutions said in a letter to investors posted on its website that it remained in the "best interests of all investors" to continue the suspension.

Link has to give an update on the suspension at least every 28 days. It said it expected to provide another update before July 29.

Woodford put gates up on the fund after being unable to meet redemption requests totalling nearly 300 million pounds.

The fund has sold more than 300 million pounds in UK-listed stocks since the suspension, but analysts say it may need to raise at least one billion pounds to meet further redemption requests. They expect the fund to be closed for months.

"Many investors accept that the portfolio is populated with very undervalued companies....Over the long course of financial market history, valuation wins out," Woodford said in the video.

Woodford has come under fire from the Financial Conduct Authority for ignoring the "spirit" of rules forbidding funds aimed at retail investors from investing more than 10% in unlisted assets.

The fund made full use of the 10% cap. In addition, four of its investments, totalling a further 11% of the portfolio, were listed in Guernsey and have not traded.

Illiquid assets are harder to sell quickly to meet redemption requests in a fund like Woodford's that allowed investors to withdraw their cash every day. (Writing by Carolyn Cohn; Editing by Deepa Babington)

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