The first quarter wasn’t pretty, that’s for sure, with funds in every equity category posting losses during the period, according to consulting firm Mercer. The S&P 500 index, for one, lost 9.4 percent during the first quarter, the largest drop since the third quarter of 2002, when the index posted a 17.3 percent loss.

The decline in that mainstay index triggered a substantial drop in the value of U.S. equity funds held in 401(k) plans. The median large-cap growth fund tracked by Mercer plunged by 11.6 percent during the quarter, while large-cap core and large-cap value funds dropped by 9.5 percent and 9.1 percent, respectively.

“Participants took a bigger hit earlier this year than they have in a pretty long time,” said Andrew Kramer, a principal at Mercer. He added that the S&P 500 also posted a loss of 3.3 percent in the fourth quarter of 2007. “It wasn’t just limited to the U.S. either, so it had a pretty far-reaching impact.”

Overseas, emerging-market funds registered the worst performance, with a median decline of 11.3 percent during the quarter. The median global equity fund lost 9.6 percent, according to Mercer, while the median international fund dropped by 9.1 percent.

“There were few places for participants to hide during the quarter,” Kramer said.

The good news for plan participants is that the second quarter is off to a strong start. The S&P 500 index recovered quickly and posted a 4.9 percent gain for the month of April, ending a streak of five consecutive negative months. Non-U.S stocks were up more than 5 percent in April, while emerging markets were up more than 8 percent.

Filed by Mark Bruno of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.