This fatwa borrows the definition of 'mutual fund' (reksa dana) from Law No. 8 of 1995 on Capital Market, defining it as:
'... a container used to collect funds from society financiers to be reinvested in a securities portfolio by an Investment Manager.'
The fatwa qualifies that there are many components of a conventional mutual fund that contravene Islamic shari'a, from a contractual perspective, as well as from investment and profit-distribution perspectives.
Among other points, the fatwa stipulates that mutual funds may not be used to invest in non-halal investments, such as gambling enterprises, conventional financial institutes that rely on interest-bearing banking activities, non-halal food and beverage distributors and producers, and insider trading. Profits must also be divided proportionally to financiers.