I replicated your setup and this has worked for me. Pay closer attention to the collision setup (on the right pane)
NOTE: This is UE 5 Early Access - not UE4, but I expect the behaviour to be the same.
Cake BP (I call it Disc)
Knife BP (I call it Bullet)
Ideally I would make a collision component as the root component of my BPs, such as a Capsule or Box, and add the static mesh as it’s child. However in the above example I tried it make it as close as your setup, so I used the Static mesh itself as the root.