Necroing this post because it’s the top result when I googled this problem, and I believe this other post contains the final answer which could save folks some time: Bug get Relative Location return the to world location
“This is intended behavior. This is because when you Simulate Physics on a component, it detaches from its parent and the simulation then takes place in world space. So when you’re returning the relative location of a component that is simulating physics, you are returning its location relative to the world.”