I don't think that's right, at least this is not the way I learned it: the terms on which you borrow money to fund your investments should be considered a part

I don't think that's right, at least this is not the way I learned it: the terms on which you borrow money to fund your investments should be considered a part of the model. So if you borrow short term and invest long term, your model itself now includes maturity transformation, and it can blow up just like any such model. Sure you can then construct a different model that's basically the same but without the maturity transformation, and that's okay, you'll get different returns. Thinking about it this way I think it's still fair to blame LTCM, their investors were free to do whatever their contract allowed them to do.