On most rankings of mutual fund performance, two fund families based in the Washington area show up among the biggest winners -- and the biggest losers.

It's no accident because the mutual funds managed by ProFunds of Bethesda and Rydex Investments of Rockville are designed for investors who want to take risks.

Not just the routine risk that every investor takes in buying stocks -- hoping they will go up, fearing they will go down -- but twice that much risk in some of the funds managed by the two firms.

If you think the market is moving up, Rydex Titan 500 and UltraBull ProFund are mutual funds that are designed to go up twice as much as the Standard & Poor's 500-stock index. Which means, of course, that if the S&P goes down instead, you will lose twice as much money as you would in an ordinary mutual fund that tracks the S&P index.

Or if you are absolutely certain that the market is heading down, Rydex and ProFunds have "inverse funds" that go up in value when the market goes down. For the truly confident contrarian, they even have "double inverse" funds that move in the opposite direction of the market -- multiplied by two. For example, when the S&P falls by 100 points, the UltraBear ProFund and the Rydex Tempest 500 go up by 200 points. Of course, when the S&P moves in the wrong direction, your losses double.

"People don't quite know what to make of it," acknowledges Michael Sapir, the chief executive of ProFunds, who founded the firm with partner Louis Mayberg. Sapir worked with the Skip Viragh, the late founder of Rydex, before launching ProFunds.

Sapir explained that the exotic funds were created to serve the needs of active traders and professional money managers. They want investment vehicles that will allow them to try to make money regardless of what is happening in stocks or other markets and to make more money than they can by simply buying stocks. The funds are also widely used in hedging strategies where the risk of one investment is offset by another investment.

Their track records are good enough that investors have put more than $13 billion into the Rydex funds and more than $7 billion into ProFunds.

That $20 billion is a lot of assets under management for two companies that started on the back streets of Bethesda -- Rydex in 1993, ProFunds in 1997 -- and since have grown to dominate their peculiar niche in the mutual funds market.

Most mutual funds promote themselves as low-cost, low-risk vehicles for small investors who want to build a nest egg. Instead of trying to pick stocks on your own, the conventional funds say, let us do the stock picking for you. And even if you can only put in a few thousand dollars, you can buy a mutual fund and watch your investment grow over the years.

Today the biggest single flavor of stock fund is the "index fund" that eliminates stock-picking and simply invests in all the stocks in the S&P 500, the Nasdaq 100 index or some other popular measure of the market. The theory is that stock research is costly and so ineffective that the majority of managed mutual funds never even match the performance of a broad index like the S&P, let alone "beat the market."

Rydex and ProFunds are in the index fund business but with various twists. Their latest innovations are funds that allow investors to bet on whether the value of the U.S. dollar will rise or fall compared with foreign currencies.

These funds are not aimed at the usual buy-and-hold mutual fund investors. "We don't really have any marketing efforts to individual investors," Rydex's chief executive Carl G. Verboncoeur said. Instead the firms go after professional investment advisers who manage money for individual clients. Three-quarters of their clients are investment pros; the remainder are active traders who like playing the markets.

Small investors are weeded out by a $25,000 minimum investment at Rydex and a $15,000 minimum at ProFunds. (Still, ProFunds is seeking a higher profile with the general public. The company is trying to negotiate a sponsorship deal to rename Robert F. Kennedy Memorial Stadium, the temporary home of baseball's Washington Nationals, as ProFunds Field at RFK.)

Unlike most mutual funds, which promote their investing skills and the long-term gains of their funds, Rydex and ProFunds simply promise to do what they say they will do.

"We're agnostic about the market," Sapir said. "We're in the business of delivering correlation. If you want a fund that goes up twice much as the market or goes up when interest rates go down, Rydex and ProFunds will sell it to you."

The rap on the firms when they first began was that they were building gambling dens where unsophisticated investors could lose their shirts even faster than on Wall Street. Time and $20 billion worth of customers have tempered that criticism, but Morningstar, the mutual fund research service, is cautious about Rydex and ProFunds

The problem, Morningstar's Terence Geenty says, is that the active-trading strategies for which the funds were designed "are very, very difficult to do effectively, particularly for the average investor."

Historically, he said, amateurs have not done well when they try to time the market by jumping in and out of stocks, hoping to catch the next trend.

Market timers use Rydex and ProFunds because they are no-load funds, meaning buyers don't have to pay a commission, which allows to shift money from one of their funds to another pretty much at will. When they think the market is heading up, the timers go into the funds that rise twice as fast as the S&P; when they think it is headed down, they shift to inverse funds that gain value as the market declines. As a result, the assets in the funds can swing widely, though most of the money tends to move among funds in the family.

"We use both ProFunds and Rydex," said Mark Freedman, president of TriCapital Advisors in Bethesda, which manages about $185 million. "We believe in active management," he said. That means trying to outperform the market and looking for ways to make money even when the markets are moving sideways, as they have this year.

As an example, Freedman cited a client who is preparing to retire and has made big gains on stock investments over the years. The portfolio might be protected against losses by hedging with a fund that goes up twice as much as the S&P goes down. Putting 5 percent of the holdings into such a double inverse fund would protect against a 10 percent decline in the market, he explained. Similar strategies can be used to protect against changes in interest rates.

How do Rydex and ProFunds manage to gain or lose twice as much as the market?

By using leverage. In addition to buying stocks, the leveraged funds invest in stock index futures. Stock index futures are contracts to buy a basket of stocks at some time in the future, based on today's price. Buying a futures contract locks in the price, but it costs only a fraction as much as buying the actual stocks.

A leveraged fund seeking to double the return of the S&P might use 80 percent of the investors' cash to buy the actual S&P stocks and 20 percent of it to buy stock index futures, or however much it takes to get the targeted 200 percent returns.

Getting a fund to move in the opposite direction of an index involves more exotic trading strategies, such as short-selling, which means borrowing stocks and then selling them. If the stocks go down, you can buy them back later at a lower price and make money. Shorting strategies also can be leveraged with futures contracts.

Finding the exact mix of stocks and futures contracts needed to get the desired returns and then doing the trading that makes it work is what Rydex and ProFunds get paid for. Neither company will say how profitable the business is. Both firms are privately owned -- ProFunds by the founding partners, Rydex by the family of the late founder.

Nor will they get specific about details of their operating methods, which involve the exotic securities known generically as derivatives. Needless to say, it's not simple. "It's very, very much a science, but there is an art to it," Rydex's Verboncoeur said.

But ProFunds and Rydex know how to do it, and Morningstar says they are the only ones in the mutual fund business who do what they do.

Michael Sapir, left, and Louis Mayberg are the founders of ProFunds of Bethesda.Carl G. Verboncoeur, chief executive of Rockville-based Rydex Investments, which does not market its mutual funds to the usual buy-and-hold investors.