Standard & Poor’s hedge fund index fell 0.54% in July, as two of the three sub-indices ended the month in negative territory.

Although market volatility as a whole remained relatively low, higher oil prices and geopolitical concerns have resulted in risk reductions, Standard & Poor’s said. It noted that the S&P Event-Driven Index ended the month down 0.75%.

“Negative consumer and money center sector performance caused losses for some investment managers as it appeared that surging oil prices may take money out of consumers’ pockets,” said Justin Dew, senior hedge fund specialist at Standard & Poor’s. “Merger Arbitrage had a difficult month as a general widening of spreads negated the effects of a few large deals closing early.”

Also, the S&P directional/tactical index fell 1.41% in the month, with losses in wquity long/short strategies noted as the major contributor to the negative return. “Relatively high gross and net exposure hurt performance during a broad based decline in equity markets,” adds Dew. “Investor concern on the prospects for stocks in a rising oil and interest rate environment appeared to weigh heavily on the market. Managed futures also declined for the month as strong gains in energy and grain positions were offset by losses in currency, financial and index positions.”

The one component to buck the trend was the S&P arbitrage index, which rose 0.51% in July, as all three of its strategies ended in positive territory with convertible arbitrage as the best performer. “An upward drift in implied volatility coupled with a decline in new issuances drove the secondary convertible market higher during the month yielding gains in most portfolios,” said Dew. “Fixed Income Arbitrage managers realized gains in yield curve and swap spread trades while mortgage-backed securities trading proved more difficult. Equity Market Neutral strategies continued to have difficulties, but ended the month slightly positive.”

As for the other indicies which aren’t components of the overall hedge fund index, the S&P managed futures index dropped 1.72% in the month, as positive economic data resulted in a mid-month trend reversal boosted the U.S. dollar against major currencies, hurting performance for trend-followers. Losses were only partially offset by gains in long energy positions as crude prices rose.

And, the S&P equity long/short index slipped 1.86% for the month. “Even though most economic indicators point to a fairly bright earnings outlook, many investors continued to focus on geopolitical risks,” S&P says. “Rising inventories in some segments of the technology market and uncertainty over government attempts to slow growth in China continue to weigh on the markets.”