Hedge funds are increasingly finding it difficult to hire good people.

That's according a big report on hedge fund hiring trends that Barclays sent out to clients last month.

The 24-page report, prepared by the bank's hedge fund strategic consulting team, is clear in its message: Hedge funds are going to have to shape up if they want to recruit.

"An HF is a 'people' business; a strong and stable talent base is the main, if not the only, source of competitive advantage," the report said.

"In recent years a confluence of industry trends is making talent harder to find for many hedge funds, mainly because the demand for hedge fund talent is continuing to grow as industry assets rise while the sell side (banks), traditionally a key source of talent, is shrinking in size."

The report noted that hedge fund assets grew to $2.8 trillion in 2014 from $1.4 trillion in 2008. Headcount grew to 75,000 from 35,000.

Historically, the investment banks have been a steady source of talent for hedge funds. That's starting to shift as more young people head to Silicon Valley.

"The sell side is also challenged because it no longer appears to occupy a preeminent position in new graduates' minds as they think about career opportunities. Technology firms are, more recently, a bigger draw for top talent at universities and PhD programs."

Finding traders is harder today

That said, the sell side still supplies the most talent to hedge funds. It's just not as dominant as it used to be.

According to Barclays, the banks supply around 30% of investment talent today at hedge funds, down from what they estimate used to be about 70% in the past.

"Figure 6 compares the growth rate of campus recruiting class sizes for Investment Banking and Capital Markets at banks from 2009 to 2014. Select highlights: Investment Banking class sizes, across both graduate and undergraduate programs, have increased by ~50% (~60% at the analyst level) over the past five years. Capital Markets class sizes, on the other hand, saw a decline of ~30% (~70% at the associate level)," the Barclays report said. Barclays Barclays noted that talent for hedge funds tends to come from two divisions on the sell side — investment banking and capital markets.

While investment-banking class sizes have increased, capital markets and sales and trading classes have seen a decrease. This, according to Barclays, may lead to a potential shortfall for certain roles and hedge fund strategies.

For instance, Barclays predicts that it will be more challenging to find traders and portfolio managers, particularly for nonequity strategies such as macro and fixed income relative value.

'Farming' your own talent

With hedge funds no longer recruiting as many folks from the sell side, they'll either have to farm their own talent or poach from other firms.

One example of a hedge fund that has been leading the way in farming its own talent lately is Point72 Asset Management, the $10 billion family office hedge fund led by Steve Cohen.

As Business Insider's Portia Crowe reported, Point72 recently launched its own namesake academy, a 15-month paid program that trains college graduates for potential analyst positions at the firm.

As Point72's president, Doug Haynes, noted, the academy "will help us get first crack at the next generation of investor talent before they might go elsewhere."

It's a smart move.

"Our view is that given the shortage of talent availability (with exit of proprietary trading desks at banks and with the sell side continuing to shrink), there will be more focus on grooming talent internally for even these firms going forward," the Barclays report said.