hi, i recently discover the cutout feature on CPU particle for reducing overdraw :
It work fine with rgba texture, but i did not manage to make it work with Grayscale texture.
I tried to change the Opacity Source Mode, but none works.
I creating my Grayscale texture on Photoshop (2458kb), i tested all the setting compression, none works for the cutout features. If i export RGB Texture it works, but the texture is bigger (9832Kb).
resave your texture as a RGB instead of grayscale.
apparently ue4 doesnt like it when its a grayscale texture.
You wont lose any memory or other performance due to that.