LONDON (Reuters) – The Saudi Aramco IPO was supposed to be a cornerstone of Crown Prince Mohammed bin Salman’s ambitious plan to open the gates to foreign investment in the kingdom. But there’s no sign of a stampede.

The state oil giant confirmed on Thursday that its initial public offering would be the biggest in history, raising $25.6 billion. The offering will surpass Alibaba’s 2014 New York flotation and value Aramco at $1.7 trillion – still short of the prince’s $2 trillion goal.

However many global investors focused on emerging markets are set to stay away when Aramco debuts on the Riyadh bourse, expected next week, according to information provided to Reuters by 26 major asset managers outside the Gulf region who collectively manage more than $7 trillion.

Most of the active fund managers said they would likely steer clear of the IPO, citing persistent concerns about risks around governance, the environment and regional geopolitics.

All of the passive managers, who track certain indexes rather than making specific investment calls, also said they would not buy shares in the offering. But the bulk of them are likely to routinely become investors when the stock is admitted into the indexes of benchmark providers MSCI, FTSE Russell and S&P, a development due as early as late-December.

While the responses give an indication of institutional demand, they provide just a small window into global appetite as they largely concern investments made by funds open to the public. Much larger sums of money are often invested on a private basis on behalf of major players like pension schemes and sovereign wealth funds.

Saudi Aramco declined to comment on the investor responses.

Few industry experts anticipated lukewarm global interest when the crown prince sent the energy and finance worlds into high excitement in 2016 as he announced plans to list the world’s most profitable company, including a marquee international debut, staging the biggest IPO in history.

“When this was announced, the Saudis and the crown prince in particular were looking for something that was going to put Aramco on the international investor map and that clearly hasn’t happened,” said Charles Hollis, a former UK-Saudi diplomat and director at intelligence consultancy Falanx Assynt.

Institutional investors bid $106 billion to take part in the IPO, which was more than 4.6 times oversubscribed, but how much of that demand came from overseas investors was not disclosed. The last bid process update to do so was published last Friday, and showed foreign institutional demand at 10.5% of the total $38.4 billion tabled.

TO BUY OR NOT TO BUY

Reuters contacted 66 non-Gulf asset managers who all either had exposure to Saudi stocks amounting to at least 5% of their portfolios, or of above 1% to the MSCI’s Emerging Markets Index, according to an analysis of data from Morningstar, a U.S.-based financial research group.

Ten other leading non-Gulf investors who were not on that list were also interviewed.

Of the total of 18 active asset managers who provided information, 12 – or two-thirds – said they did not plan to participate in the Aramco IPO. Five said they had not decided, while one said it would invest in the offering.

Seven of the eight passive investors that spoke to Reuters said they would likely buy Aramco shares as and when they were included in their respective benchmark indexes, but would not take part in the IPO. One said it did not plan to invest at all.

The range of concerns by active investors are broad; some simply won’t invest in oil companies while others are wary about state interference in the running of the company, Saudi Arabia’s human rights record or geopolitical risk, which came to the fore with an attack on Aramco’s oil facilities in September.

“Considering its core business and the impact of its contribution to global emissions, and following our responsible investment policy, we have no interest or plan to invest in Saudi Aramco,” said a spokeswoman for Canadian investor Financiere des professionals, which has a 2.15% stake in Saudi stocks through its FDP Emerging Markets Equity Portfolio A fund.

Rohan Murphy, energy equities analyst at Allianz Global Investors, said his view on the company had not changed and his firm would be unlikely to invest, citing issues including governance, minority shareholder rights and geopolitical risk.

The counter argument, say some fund managers, is that Aramco has a sector-leading low-cost base, less carbon-intensive operations and an attractive dividend yield, but despite that, its eventual price tag could be key.

Dominic Bokor-Ingram, portfolio manager at Fiera Capital, which has around $80 million invested in Saudi stocks across four funds in the Morningstar data, said he had yet to make a decision on taking part in the IPO.

“It’s obviously a great oil company because it produces a lot of oil, has a lot of reserves, and has one of the lowest costs of production in the world, but the question always is what do you pay for that? That’s what we’re working on at the moment.”

For an interactive version of the graphic, click here tmsnrt.rs/2qTOCNJ.

INTERNATIONAL ROADSHOWS CANNED

The precise amount of passive demand for Aramco shares – following its inclusion in the benchmark indexes like MSCI – would depend on its valuation, a subject of contention with bankers after hopes for a $2 trillion valuation fell to range between $1.6-$1.7 trillion.

Two banking sources close to the deal estimated that passive investment in the first few weeks after inclusion in the indexes would range from $3 billion to $5 billion, depending on how the free-float was calculated by different indexes.

Aramco appeared to see the writing on the wall last month when it canceled international road shows for the IPO. The decision came after bankers said few foreign investors were willing to invest at the valuation they wanted.

In its 658-page IPO prospectus, Aramco sought to address some potential investor concerns by announcing plans to bolster its renewable energy spend and reduce its energy consumption.

It also raised other potential risks such as terrorist attacks, antitrust complaints, as well as the government’s right to decide maximum crude output and direct Aramco to undertake projects outside its core business.

“They’re trying their best to make it a palatable proposition and that’ll be fine for some types of investors, but not necessarily for one like us,” said Rob Marshall-Lee, investment leader of the emerging market equities team at London-based Newton Investment Management.

For an interactive version of the graphic, click here tmsnrt.rs/35BlQ39.

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