This thread seems to be helpful on the topic: Creating Cities with Interiors, Static Mesh vs. HISMs ? - #3 by CoquiGames
It seems that HISMs work well when you want to cull individual actors from the cluster, whereas merge actors uses the whole mesh as it’s treated as one mesh.
The other difference about HISMs is that the static mesh has to be exactly the same–shared across the instances–otherwise, it won’t even allow creation with the merge actors tool. Even having a different material applied to the same mesh will not allow instancing. Negative scale cannot also be inconsistently applied to one of the actors. In those cases, using merged actors is mandatory.
Otherwise, from my own personal tests, HISMs seem to create less draw calls while slightly increasing the tris. That is the best setup–especially if they are able to effectively take advantage of PCV and cull distance volumes.