NEW YORK (Reuters) - Top investment fund managers at the Milken Institute Global Conference this week said they had little choice but to focus on unusual and complicated corners of the financial markets as stock markets have risen and interest rates remain low.

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“If you look out there and you have a few shekels you’d like to put to work, it’s hard to figure out how to do that on an attractive risk-return basis,” said David Hunt, president and chief executive officer of Prudential Financial’s $1 trillion investment management unit PGIM.

Hedge fund and private equity fund managers gathered at the Beverly Hilton hotel for the annual event detailed a wide variety of ways they are hunting for better returns than what more generic investments, like U.S. government bonds, can offer.

Troubled European loans continue to be an attractive opportunity, Ilfryn Carstairs, co-chief investment officer of $12 billion Värde Partners, said in an interview. His firm has been active in debt of struggling real estate developments in Spain, and also lending to companies involved with commodities, such as San Antonio, Texas-based Lilis Energy Inc LLEX.O, which hunts for and produces oil and gas.

“It’s a market where you need to look for illiquidity and complexity,” Carstairs said.

Mitchell Julis, co-CEO of $20 billion credit specialist Canyon Partners LLC, said he looks for “gaps and cracks in the system” of corporate finance where companies cannot access capital through high yield bonds or other more traditional mechanisms.

Steven Tananbaum, chief investment officer of $25 billion credit firm GoldenTree Asset Management LP, told Reuters on the sidelines of the Milken event that he preferred idiosyncratic bets such as the bonds of Pemex, the Mexican state-owned oil company, or the debt issued by La Rioja, a province in Argentina.

But, overall, managers described the process of finding lucrative investments as a struggle.

“We are grinding it out every day, either squeezing basis points of extra yield in our public portfolios or making an extra call to source a private transaction,” said Mark Attanasio, managing partner of $24 billion credit investment firm Crescent Capital Group LP.

Several big investors urged caution, arguing that stocks appear fully priced and bond markets may be poised for a correction.

GoldenTree has more of its portfolio in cash than normal as it waits for opportunities to invest at lower prices, Tananbaum said.

Scott Minerd, global chief investment officer at $260 billion Guggenheim Partners, recommended investors take money out of the stock market and either hold cash or add infrastructure plays to their portfolios.

Oliver Wriedt, co-CEO of $13.7 billion private debt firm CIFC LLC, said the risk-return measures of high-yield bonds were unattractive compared to leveraged loans. “The bond market is vulnerable to a price correction,” Wriedt told Reuters.

Whatever the risk, large investors at Milken seemed resigned that there just wasn’t much to do.

“Our biggest challenge,” said Prudential’s Hunt, “is that markets are pretty fully priced around the globe.”