Coniston Partners, once known as one of Wall Street's most aggressive takeover firms, said yesterday that it is shutting down its $700 million investment pool, one more sign that the 1980s takeover boom is on the wane.

"We just feel that the changes in the market make it less certain there will be interesting opportunities," said partner Keith R. Gollust. With deals few and far between, "rather than just sitting on the cash, we'd rather distribute it." Most of the $700 million will be returned to investors.

The disbanding of the partnership reflects the radical change in the investment climate in the 1990s as banks and other big lenders have grown more conservative in their lending and less anxious to do highly leveraged deals.

Gollust and his two partners, Paul Tierney and Augustus Oliver, will keep the company intact but change its focus, Gollust said.

The company will follow through on its investment in UAL Corp., in which it holds a nearly 10 percent stake, as it awaits the outcome of an employee-takeover attempt. UAL is the parent of United Airlines.

Coniston also will concentrate on TW Services Inc., a food services company that it acquired in 1989.

Beyond that, Gollust said, Coniston will continue to conduct trading operations and will undertake new projects as they arise.

"These investments don't come up that often," Gollust said.

In 1987, when opportunities to cash in through investments in undervalued companies and takeover targets were thick, Coniston forced a breakup of Allegis, as the company that controlled United Airlines was called then.

Under pressure from Coniston, the board of Allegis handed former chairman Richard J. Ferris his walking papers and reversed his strategy of building a travel conglomerate. After Allegis sold off its Westin and Hilton International hotel chains and Hertz car rental business, Coniston sold its 14 percent stake for a profit of about $460 million.

The company also profited from investments in Gillette Co., Viacom International, NL Industries Inc. and Storer Communications. The fund produced annual returns of about 42 percent, including the partners' 20 percent share.

Since those days the climate for leveraged buyouts has grown chillier, as the difficulties of UAL indicate. A proposed takeover by United's management and pilots collapsed in October 1989, after it failed to win financing. Now an alternative takeover is underway by all three of United's unions who are trying to put together enough financial backing to buy the airline.

In the meantime, companies that were forced to restructure and take on high-priced debt are falling by the wayside. "I would expect there are going to be further failures of corporations that have this type of financial engineering attached to them, and the more that fail, the less likely it is there is going to be these deals in the future," said Robert E. Torray, president of Robert E. Torray & Co., a Bethesda money management firm.

"This is all part of the cycle," said Dan D'Aniello, managing director of the Carlyle Group, a Washington-based takeover firm.

Despite the lull in the financial markets, he said there still are undervalued companies that would be good investments.

Coniston, which is named after a street in Short Hills, N.J., where Gollust lived, will look for the financing it needs as deals arise, said Gollust.

"Their track record is so good that they no longer need to have a standing fund available. They can raise money in a very short time. Part of what those investment funds are about is being able to act quickly," said D'Aniello.