(Adds Daniel Loeb's fund, background on markets and hedge funds)

BOSTON, Aug 31 (Reuters) - Hedge fund billionaires David Einhorn and Daniel Loeb saw their main funds lose roughly 5 percent in August during a dramatic market sell off, two people familiar with their returns said on Monday.

Einhorn's Greenlight Capital fell 5.3 percent, extending the roughly $12 billion firm's loss for the year to 13.8 percent, the sources said.

Loeb's Third Point fund dropped 5.2 percent, but is up 1.2 percent for the year. Loeb"s Third Point Ultra fund fell 9.1 percent in August and is essentially flat on the year with a 0.8 percent gain, one of the sources said.

Einhorn and Loeb are often among the first big-name hedge funds to tabulate their monthly returns. Their August losses, coming as fear about China's falling stock market and yuan devaluation hit world markets, suggest that many other hedge funds will also show heavy losses for the month, and even the year. Hedge fund returns, unlike mutual fund returns, are closely guarded secrets and investors often promise not to discuss them.

At Greenlight big bets on Consol Energy Inc, Micron Technology Inc and SunEdison Inc weighed on performance, the two sources said. Amid the markets' drop, Einhorn cut his long and short bets, the sources said.

August has been a tough month for investors, with the Standard & Poor's 500 dropping 6.3 percent. Data from Hedge Fund Research shows that the average hedge fund lost 2 percent in August and is now off roughly 1 percent for the year.

Investors in hedge funds said last week's losses were far deeper and that many managers were helped by a late snapback in the markets. But several investors have grumbled that hedge funds still lost money by making big bets on commonly held stocks instead of hedging their exposure.

(Reporting by Svea Herbst-Bayliss; Editing by Tom Brown and Leslie Adler)