Thanks for your quick response!
I forgot to mention that we did package the game and there seemed to be no performance drop except in one computer (I guess that computer has issues that we can fix!).
I did try profiling (stat Game) and noticed that the “TickableGameObjects Time” goes up to 30.00 ms, causing the whole gameplay to go down 30 FPS or lower.
The issue is, I only disable one blueprint function called “Start Recording Replay from BP”, which is just a function from the Game Instance that calls the C++ function UGameInstance::StartRecordingReplay(…). See images below. Once I disable this one function only, which is called through the Begin Play for our controlled Pawn, the FPS drop never occurs.
Since the Replay System of Unreal relies on replication, I also tried disabling replication for all variables that were replicating and still no luck.
We appreciate your response and we are looking forward for any other ideas you and the rest of the Unreal Community might have about this!

