S&P 500 bests hedge funds for second consecutive month-HFR

Aug 7 (Reuters) - Hedge funds on average gained 1.05 percent in July, trailing the benchmark S&P 500 Index for the second straight month, according to data from research firm Hedge Fund Research Inc.

Hedge funds in the $2.1 trillion industry were up 2.88 percent this year on average, HFR said. By comparison, the S&P 500 was up 7.41 percent through July. Last month the index rose 1.26 percent.

Kenneth Heinz, HFR's president, said the industry's meager performance reflected "the fluid and volatile environment driven by the continuing European sovereign debt crisis and the recent softening of U.S. economic data."

Funds with a "short" bias nearly tripled the industry average, however, with a 2.95 percent gain in July after falling 1.08 percent the month prior. But funds that bet against the markets are still down 3.68 percent for the year.

Equity-focused hedge funds were up 2.62 percent for the year.

So-called "macro" funds, which bet on interest rates, credit and currencies, were up 1.87 percent in July and 1.08 percent for the year.

The industry sub-sector that have come closest to matching the S&P 500's gains through July was fixed-income, asset-backed funds. They're up 9.69 percent for the year and gained 2.63 percent in July.