I am using the HLOD system with Simplygon to optimize our levels for iOS.
A problem I have come across is that each HLOD cluster that is created also creates a new material. On mobile new materials are quite memory intensive with each one being a few meg when cooked. All of these materials appear to be the same, so I assume they could be instanced.
I have tried to manually replace the created material on a HLOD proxy mesh with an instance, buit this appears to break the HLOD system with the HLOD stops working, and is not rendered at all in game.
The LOD system for Static Mesh that uses Simplygon to generate a new proxy LOD mesh for Smesh DOES create an instanced material.
Have you tested this against 4.12 yet? There have been some significant changes with HLODs that should work much better now.
I tested this with and without merging materials for the HLOD clusters and replaced with an instance material. This didn’t seem to cause any issue that I could readily see.
The best option if you want to use instanced materials is to make sure to uncheck the option for Merge Materials and apply the instance there if it references the original base material. If the option is left checked the materials will merge creating a new material atlas that applies to all the meshes associated in the HLOD.
We’ve got some more in-depth documentation coming soon for this feature as well.