You would need to create collision for the bladed part of the mesh that was separate from the handle, in order to allow the handle to bounce off and the blade to penetrate. The information you get from the blade hit event could then be used to determine all sorts of important collision information such as exact hit location, normal, and velocity. From there the design would really be up to you, but it should be possible, and sounds like cool use of UE4’s collision too!
Hope this helps.
-Spiris