Missing materials after Chaos Cloth LOD change

I’m working on a multiplayer game. We’ve found a bug where getting close to another character (and their LOD transitioning to LOD0) will result in materials missing on components using Chaos Clothing sim (in this case, the material on the character’s cape being grey checkerboard). Moving away from that character, to LOD1, will see those missing materials return.

I was able to reproduce this in Editor by forcing LOD change and saw that the shaders had to be compiled when I changed to LOD0. After a couple of seconds, the material was in place.

What can we do to avoid this issue? Is there a step missing that ensures that all shaders for each LOD have been pre-compiled?

Edit: narrowed this down further, it seems to be caused by a conflict between our player outline (Overlay Material) and the Chaos Cloth.

Had this problem since switching to UE5. Tried many things, but nothing helped. But I just came across the flag “Used with Clothing” in the “Usage” category in the material editor of my Outline material (in my memory I had already tried this in 5.3). Now (with 5.4.4) it has fixed the problem in the editor for me. However, I haven’t made a build with this “fix” yet to really validate it. Please let me know if this works for you.