The recent move by the Swiss Central Bank to remove the cap on the country’s currency neatly highlighted the dilemma for asset allocators in the current environment: On the one hand, the current volatility in currency markets shows the dangers inherent in predicting the level of different currencies; on the other, it shows how profoundly currencies can impact investment returns.

The problem had already started in 2014 with a significant appreciation in the dollar and depreciation in the Euro, accounting for a sizeable proportion of the difference in performance between the two markets over the course of the year. Fred...