The issue seems to occur when a replicated child actor is received on the client before its parent.
The child actor will first be spawned at its correct global position, with its root component's position being relative to the world.
Next the parent is spawned on the client and the child actor component is attached to it. The child actor component will be at the correct relative position, but the position of the child's actor's root component will now be relative to the parent actor, causing a large difference in the child actor's position on the client.
See the linked UDN for more info, as well as a sample project reproducing the issue.

Steps to Reproduce

1. Create a replicated actor that contains a replicated child actor component. Set the child actor's position to be offset from the parent actor. Ensure the net priority of the child actor is higher than the parent's.
2. On the server, dynamically spawn this parent actor.
3. Observe the child actor's position is incorrect on the client.

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ComponentUE - Networking
Affects Versions5.4
Target Fix5.5
CreatedApr 4, 2024
UpdatedApr 9, 2024