As a component in a portfolio, the M-Note is designed to lower overall volatility, while guaranteeing a minimum return at maturity. In return for this protection, investors surrender upside potential and any dividend distributions.

The product, with a required minimum investment of only $1,000, can stipulate rise-and-fall limits ranging from 15% to 30%. M-Notes can also be structured to provide a guaranteed minimum return beyond the original investment.

"It's good for people who want to participate but don't know which way the market is going," Hensler said. "It's our most popular product right now."

The product has generated increased interest as investors have increasingly sought safe havens for their money. The firm began selling structured products in 2007, when it generated $300 million in net new assets. It was forecast to bring in $750 million in 2008. Hensler says his advisor clients initially think the product is too good to be true and are reluctant to put client assets into it. But once they see how it works, they come back for more.

Indeed, the product's popularity has helped DWS gain client assets. Deutsche Asset Management, which comprises DWS, an alternatives unit called RREEF, an insurance unit called Deutsche Insurance Asset Management and an institutional unit called DB Advisors, had $665 billion in managed assets as of December 31, 2008. DWS accounts for $292.5 billion of those assets, of which more than $115 billion is based in the U.S. It brings in those assets by selling products through wirehouses such as Morgan Stanley or banks such as Bank of America.

Hensler says DWS' novel approach to asset management couldn't have come at a better time. Investors, faced with lower return expectations and higher volatility, have come to crave consistency and predictability. The average annual return on stocks in the 1990s was 18.2%. That figure dropped to -0.04% from 2000 to the end of 2007. Annual bond returns, which averaged  12.4% in the 1980s, fell to 7.7% in the 1990s and were 6.19% from 2000 to 2007. With the current market meltdown, returns have only eroded further.

Making matters worse, the correlation between investments has increased, defeating the purpose of diversification. The result is that the current paradigms for modern portfolio theory and asset allocation are, at least temporarily, no longer working. That, Hensler says, has created opportunities for managers that can be creative.

Investors, for example, have demonstrated they want more alternative investments. U.S. institutions allocated only 3% of their assets to alternatives in 1997, but that figure jumped to 13.8% in 2007. They are also looking for more "liability driven investments" that protect against things such as inflation, interest rate risk and a poor market. And they also want to ensure their retirement assets remain safe. Traditional asset allocation targets do not always correlate with life events such as retirement. Liability driven products do.

Hensler believes his firm can capitalize on the need for a new financial paradigm because it has an investment bank, Deutsche Bank, that can manufacture these novel products and has a distribution network, DWS, that can sell them. Hensler says DWS wants to democratize the investment process-giving retail investors access to "smart money" strategies typically only used by institutional investors.

"We were talking about these issues before the market fell apart, and we were hoping there would be a small dislocation to prove us right. We didn't see, we didn't expect and we didn't wish for the tsunami that hit us," Hensler said. "But as far as DWS is concerned, we don't need to adjust our vision or strategy. Today's market conditions have proven us right."