Squash, a sport that Forves magazine has described as a "blend of physical frenzy and snob appeal," is about to be promoted in downtown Washington. It should prove to be a perfect match.

The city's first commercial, or private, squash facility is being constructed as part of one Lafayette Centre, a huge new office and retail complex under construction in the center of the block bounded by L, M, 20th and 21st Streets NW.

Convinced that an investment in squash can only benefit from the tennis boom and attention to physical fitness -- especially in a town where there is a pressure-cooker atmosphere in many offices and an absence of leisure time -- local businessmen Frederic Corle and Thomas Lott have formed the Washington Squash Racquets Club.

If construction proceeds as now planned, lawyers, doctors, government workers and other professionals as well as squash enthusiasts will be able to open the fall season on Sept. 1, using 10 air-conditioned courts and associated dressing rooms, sauna and exercise studio.

Although traditionally the preserve of privated clubs and men's colleges, squash has been growing in popularity. In Australia and Britain, there now are more squash players than tennis players. Clubs are opening all over Manhattan and in other cities.

In Washington, th appeal of squash is likely to be related to the amount of time it requries. The game is confined to a small area (a court is 32 feet long, 18 1/4 feet wide and about 16 feet high) and the action is furious. It's close to hand ball, but in squash the players are side by side on the court hitting shots off four walls. In less than an hour, a player knows there has been thorough exercise.

Nationwide, an estimated 1 million persons play squash on about 5,000 courts. Women account for more than 40 percent of public squash memberships at New York clubs, were 80 percent of players are newcomers to the game.

Currently, there are about 45 squash courts in the Washington area -- half of them at clubs, colleges, the Pentagon (8 courts) and Federal Reserve Board (2 courts) which are closed to the general public. The only downtown facilities are at the new YMCA, which requires a large membership fee.

Corle's group has not yet established rates for the new squash club, but he said members will be assured of court availability at a cost below those currently charged. In New York, squash courts rent for as little as$5 an hour and memberships cost $25 to $50 a year.

The Washington Squash Racquets Club will be open to men and women, families, students and junior members for an annual membership fee and they will pay as they play, booking courts in advance or playing as courts are available. Clinics and lessions by professionals are planned and the club expects to host tournaments to encourage league play.

Corle and Lott have formed a corporation that is the general partner in the club, eith an investment of $50,000. Limited investment partnerships are being sold for up to $25,000 each and initial capitalization is estimated at $650,000 -- including interior architecture by Skidmore, Owings and Merrill.

Incidentlayy, manufacturers, coaches and club owners have estimated that the squash market is growing by 20 percent a year, and now totals up to $40 million a year in terms of retail prices for frames, gut, balls, shoes, clothing and court construction.

D.C. FUND TOPS: Assets of money market mutual funds jumped a record $1.1 billion in December, bringing year-end assets to a new high of $10.8 billion. According to the Investment Company Institute, a fund trade association, it was one of the largest monthly increases for any type of mutual fund in the industry's history.

A Washington-based fund, meanwhile, posted the best performance in 1978 among the five dozen or so money market funds, which are designed to provide a high rate of return with minimal risks.

According to Donohue's Money Fund Report, which monitors the funds and publishes a directory, First Variable Rate Fund of Washington, topped the money fund industry segment with an average 7.49 percent return in 1978 -- better than all the others, except for a few that weren't charging fees.

Started in January 1977, First Variable assets now exceed $52 million, compared with $7 million a year ago. The cash management fund requires an minimum initial investment of $1,000 and minimum additional investments of $250.

First Variable invests only in U.S. government secruities maturing in a year or less or government-backed obligations with longer maturities, that have interest rates that change preiodically pegged to a specific interest charge (such as the prime rate).

Given the current environment of high interest rates -- now softening a bit, with a prime rate cut possible -- First Variable' return in January has exceeded 10 percent. About two-thirds of the fund's portfolio is invested in Small Business Administration obligations with variable rates.

Largely by word of mouth, First Variable has attracted about 3,200 investors. The fund does no marketing or advertising.

Including money market funds, total assets for the mutual fund industry on Dec. 31 were $56 billion, the second highest level on record. Assets of non-money market funds totaled $45.2 billion on Dec. 31 compared with $45 billion a year earlier. Total non-money market mutual fund sales in December topped redemptions by $56.6 million.