British regulators failed to properly monitor the risks created by the derivatives-based investment strategy that upended the UK’s pension sector last year, an investment approach that poses a continuing risk to companies if changes aren’t made, according to a UK legislative panel.

Liability-driven investments, known as LDIs, invest in derivatives that are tied to UK government bonds known as gilts. They help pensions match long-term liabilities they have to retirees with less capital than they would need had they owned regular long-dated gilts. That allows them to manage exposure to changes in bond yields and free the funds’ balance sheets to invest in higher-returning investments such as stocks, real estate or private equity.