Solution:
In the enemy capsule, set the IgnorePlayer to Block.
Explanation
Let’s look at each one object’s type first.
The enemy Capsule: Pawn
The bullet: Ignore Pawn
When a collision happen, each object checks for each other response and they take the lowest. So if the enemy blocks the bullet but bullet ignores, then the lowest result is the “Ignore”.
The rankings are from lowest to highest: Ignore, Overlap and Block as they are laid out.
In our case, the response of the:
Bullet hit Capsule (In the bullet image, Pawn is set to): Blocked
Capsule hit Bullet (In the enemy image, IgnorePlayer is set to): Overlap
So the result final result is Overlap. This means that the “Hit” function won’t work.
A great resources that explains how collision filter works is this amazing video by George Prosser (Senior Engineer at Studio Gobo that developed Hogwart Legacy). Check the collision filtering section starting from 3:54.